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  • Profile photo of ZenZenZenZen
    Participant
    @skippyz
    Join Date: 2010
    Post Count: 7
    December 14, 2011 - 11:52 pm

    Thanks Richard.

    You initially advised me to switch the loan to an interest only loan with 100% offset account asap to preserve the dedcutibility of the interest going forward. I understand this
    and I have explored this in this forum and read Jamie's article as referred to in the forum
    http://passgo.com.au/blog/25-mortgage-broker-canberra-blog/75-interest-only-with-offset-account-structure.html

    After reading this article, it made me wonder if any difference from this IO w/ offset loan and our current loan P&I w/ offset structure.

    Our Building Society loan is P&I with 100% offset.
    We put all salaries and extra cash into offset account and monthly interest for home loan is deducted (set automatically) from offset to home loan account. Our home loan account balance has been almost stayed unchanged since start. We don't pay extra into home loan account.

    It seems to me this is working exactly like IO loan with 100% offset.

    what is the exact difference from P&I and IO loan in this situation??

    Profile photo of ZenZenZenZen
    Participant
    @skippyz
    Join Date: 2010
    Post Count: 7
    December 14, 2011 - 12:22 am

    Thanks again Richard and Terryw. I feel like I have read many topics in finance section but still lots to learn!

    OK, so from your advice, I understand now that as long as I can take a LOC as a secound loan to cover 20% amount of IP price and other admin/legal costs to cover from Building Society, the first IP purchase can go ahead. I believe we can get it done with current BS.

    Whether it is the best option or not is a different matter so –
    If we want to purchase second and third IPs in the near future, this finance structure with BS of 1st IP and PPOR would be any issue?
    I mean BS has the most strict lending criteria but if it serves the purpose for 1st IP purchase (considering we want to buy a few more IPs in the future). Then is it still worth go ahead with BS for 1st IP or better refinance with others?
    (please note it's been only 12 months with our BS after refinance from St G LOC)

    Cheers,
    skippyz

    Profile photo of ZenZenZenZen
    Participant
    @skippyz
    Join Date: 2010
    Post Count: 7
    December 13, 2011 - 10:52 pm

    I was just advised from our broker that I can only take a LOC from current Building Society as they hold our mortgage.
    I would like a second opinion. Is that correct that we cannot apply for a LOC from other lenders than current B.S.?

    Also, when B.S. during LOC application process, do B.S. consider current offset a/c balance into consideration?
    I assume it's all part of equity calculation.

    I recently found out that our current B.S. is one on the most conservative (strict) side in terms of lending criteria.

    Cheers

    Profile photo of ZenZenZenZen
    Participant
    @skippyz
    Join Date: 2010
    Post Count: 7
    December 11, 2011 - 11:06 pm
    karlm63 wrote:

    For your every day expenses do you use a credit card ?

    Hi karlm
    Yes, we pay all day expenses using credit card and pay off from offset account.
    We keep all extra cash in our offset account.

    The reason we refinanced from St G LOC to building society's home loan was
    we didn't utilise LOC account as the loan was only for our PPOR.

    and later recently I learned from this forum that crossing with PPOR and IP security is not what we want to do.
    On top of that, Interest rate of LOC is much higher than simple standard rate loan w/ offset. so it's not best for our PPOR loan.

    You may have a question why we opened St G LOC in the first place – because it was recommended by the advisor we used at that time. Key word – Margaret Lomas

    cheers
    Skippyz

    Profile photo of ZenZenZenZen
    Participant
    @skippyz
    Join Date: 2010
    Post Count: 7
    December 11, 2011 - 11:04 pm
    karlm63 wrote:
    Hi Skippyz

    For your every day expenses do you use a credit card ?

    Hi karlm
    Yes, we pay all day expenses using credit card and pay off from offset account.
    We keep all extra cash in our offset account.

    The reason we refinanced from St G LOC to building society's home loan was
    we didn't utilise LOC account as loan was only for our PPOR.

    and later recently I learned from this forum that crossing with PPOR and IP security is not what we want to do.
    On the top of that, Interest rate of LOC is much higher than simple standard rate loan w/ offset. so it's not best for our PPOR loan.

    You may have a question why we opened St G LOC in the first place – because it was recommended by the advisor we used at that time. Key word – Margaret Lomas

    Profile photo of ZenZenZenZen
    Participant
    @skippyz
    Join Date: 2010
    Post Count: 7
    December 11, 2011 - 10:52 pm

    Thanks Richard and Terryw for your advice and comments.

    Equity loan sounds like the way to go. I will further talk to our broker.

    For this time, we only need 20% of  aquisition cost plus legal fees from equity loan.
    We prefer not to pay LMI.

    Kind regards,
    Skippyz
     

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