Forum Replies Created
- Originally posted by Terryw:
If you have money in an offset account and withdraw that money, the extra interest incurred on the loan would only be deductible if the loan was already for investment or business. There would be no accounting problems as the loans/accounts are totally separate.
I was trying to point out that if you wanted to use funds for a deductible purchase or investment from an offset account linked to a non-deductible loan account, simply transferring the money from the offset account to the loan account and then redrawing these funds would make the interest expense on the investment portion deductible and still keep your non-deductible debt at the lower level. It has absolutely nothing to do with what the loan was setup for because it is the purpose of the funds at any point in time that determines deductibility.
If you are using a LOC as a home loan, then withdrawing funds for a mixture of personal and business use could make things messyThis applies to both a LOC and Offset Account facility and is why I advise against a LOC as it is much easier to mess things up with a LOC in my opinion.
The reason I would use the Offset Account facility in the example you are providing (where a non-deductible debt makes up the major portion of the loan account) is because it is fairly simple to deposit funds from the Offset Account into the Loan Account and then split this portion into a seperate interest only loan leaving the non-deductible debt at the lower level with a lower limit and the Offset Account still attached. It is tidy for accounting purposes.
Also, setting up your finances so ALL your income (including rental income) is deposited into the Offset Account and direct debits are set up to pay your deductible interest only repayments on the last possible day maximise the benefits of using this structure if a non-deductible debt exists. Other simple accounting methods also maximise the benifits (like claiming your deductions each week with your income).
Robert Bou-Hamdan
Mortgage Adviser‘Listed’ simply means that the property trust is available for trade through a stock exchange and usually means the investmenet is more liquid. This just means there are usually more buyers and sellers willing to trade at any given point in time.
Robert Bou-Hamdan
Mortgage AdviserI would imagine that the local council would have these records. They usually have everything on file including the original development application for properties.
Robert Bou-Hamdan
Mortgage AdviserNot my area of expertise but would it not be of great benefit to move into a property that is in a Trust or company name and pay rent so deductibility is not loat? This assumes that the property will be held long-term and CGT would not be an issue down the track. Submitting the appropriate tax form (always forget the number) would see the benefit obtained each week with income and increase cashflow.
Is this still possible?
Mark, are you out there???
Robert Bou-Hamdan
Mortgage AdviserDifferent information is obtained from different sources. It depends on what information you are seeking to determine where you go to get it. The best information costs money but there are always cheap or free alternatives if you know your way around. Maybe if you provide a list of what information you need, you might get some very good responses.
As for lenders and what they look for, of great importance is funds position and serviceability. You seem to have some funds available to settle on a property but you stated that your income and expenses match. This means you have no room to move if your expenses increase and your income stays the same. This can easily be the case if you buy an investment property and your tenant vacates. You will see yourself quickly in trouble.
I think the best thing to do would be to sit down with a mortgage adviser to see if anything is doable or meet with a financial planner to organise your finances so your income increases and your expenses decrease.
Check out the link to investor links below as it has some great websites for obtaining information. I hope it helps and let me know if you need more mortgage information.
Robert Bou-Hamdan
Mortgage AdviserTerry, I think you have missed the concepts of ‘purpose of funds’ and how to ‘effectively’ use an offset account. Money withdrawn from a Line Of Credit would also cause interest payments to rise. Assuming the money already owing was not deductible in the first place on both loans, this would cause all sorts of accounting difficulties. In any case, depositing the funds into the loan account before using it for an investment purpose would remedy your problem of deductibility.
Keeping deductible and non-deductible debt seperate is always the best way to go. Splitting is a very simple and cheap procedure.
Kerri, in response to your question, I have put together a three page outline in Word format regarding what I think about a Loan with Offset Account as opposed to a Line Of Credit. Click on the link below to view it…
Line of Credit v Loan with Offset Account
Email me if you need more information or if you disagree with anything I have written.
Robert Bou-Hamdan
Mortgage AdviserOne of the better ones I have used and a member of this forum….
Mark Unwin
Williams Partners Pty Ltd
Chartered Accountants
Mail to: [email protected]
90 Queensbridge Street, Southbank VIC 3006, Australia
Phone: + 61 3 9682 5288 Fax: + 61 3 9682 5877
http://www.wp.com.auMark is very easy to deal with Interestate as he is proficient at email correspondence and provides excellent advice.
Robert Bou-Hamdan
Mortgage AdviserThanks Steve,
Hopefully I will last more than jsut a few weeks this time. It seems I am a bad bad boy!!!
Robert Bou-Hamdan
Mortgage AdviserZonings are very annoying. What may be zoned for 1 storey development may change to 2 or more storey developments in a few years. The closest thing available to certainty these days is to be right on the waterfront but they may come up with some new invention for floating blocks of units down the track.
Robert Bou-Hamdan
Mortgage AdviserAn alternative to a LOC is to just get a split loan or investment loan for the amount of the deposit and closing costs you may need to purchase the new property. The remaining funds can be secured against the property you are buying.
Robert Bou-Hamdan
Mortgage AdviserYou might be interested to know that the flyer was circulated by an independently owned and operated franchisee and I don’t believe ANZ would have approved it.
I am trying to get more information regarding this and will let you know what I find out.
The flyer has not appeared in Sydney as far as I have seen so I don’t think it would be a national promo.
Robert Bou-Hamdan
Mortgage AdviserI have not heard of the company you are asking about but why would you take less than 10% return per annum when you can get 2% per month with similar established lenders in the market?
Keep looking around for better returns if mortgage backed securities is what interest you.
Robert Bou-Hamdan
Mortgage AdviserI wonder if the friendly building society compared their loan products with any other lenders products available in the market. I would also be very helpful if I was sucking someone into an expensive loan and had no obligation to provide the most appropriate product like mortgage brokers are required to do.
Robert Bou-Hamdan
Mortgage AdviserI really don’t see any real benefit in doing this unless it is a tricky security type. All standard processes and costs would apply whether the property stays with the same lender or not.
Robert Bou-Hamdan
Mortgage AdviserIt is common for mortgage insurance to be charged again on the complete loan amount if you borrow above 80% LVR again. The premium is for the risk associated with lending you money at high LVRs.
What Stuart referred to was a rebate that may apply (discretionary) if the loan is not very old. This usually only applies if the loan has only been in existence for less than one year. Some lenders even have a policy about this.
I think you are confusing mortgage insurance with stamp duty on a mortgage. Stamp duty is only charged on an increased amount in most cases.
Robert Bou-Hamdan
Mortgage AdviserI still see no reason why anyone would use a LOC in any situation other than as a loan for a business they are operating.
The benefits of a home loan with an offset account far outweighs any benefits attributable to a LOC.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by Stuart Wemyss:Quote:ATO eyes loans for cheat tips
Jason Clout (AFR)
2005/04/26Low-doc lenders look beyond those obstacles, instead concentrating their assessment on the person’s capacity to repay the debt.
I find this comment to be hilarious. How does a lender providing low docs concentrate on serviceability when the applicant has the ability to state whatever they want? In my opinion, they ignore serviceability altogether concentrating on the security property and credit history instead.
Robert Bou-Hamdan
Mortgage AdviserIt is sometimes important to use a local broker as an Interstate broker cannot offer you all lenders. An example that immediately comes to mind is ANZ. They require the broker to sign that they witnessed the signatures on the application form. Another example is for WA residents trying to use a non-resident broker. This is not permitted unless they are licensed.
I am sure there are enough brokers in each State to look after the people in that State.
Steve is definately one of the good guys though.
Robert Bou-Hamdan
Mortgage AdviserI use an ANZ account for personal use. There are absolutely no ongoing fees. It does not pay any interest either. I use ING Direct for interest bearing accounts although BankWest has one that pays more. Either one of these accounts also requires a standard transaction account like my ANZ one to access the money.
Robert Bou-Hamdan
Mortgage Adviser7.1% is one of the good ones.
Thanks for the welcome. It has been a while. I actually missed the place this time.
Robert Bou-Hamdan
Mortgage Adviser
