Forum Replies Created
Difficult without collateral security. Max LVR would be 50%. I would stick to the larger banks.
Cheers
Stu
Very good post Simon well done.
Some people confuse using “innovative” techniques and thinking “outside the square” with breaking the law. Think outside the square but always act within the boundaries of the law.
I know there are hundreds of brokers that would tell a client “just put $100k down in the income section… “. Sometime the broker will fill out the form for you. But were will they be when you are dragged into court? They won’t be holding your hand that’s for sure!
Investing in property is not something that is achieved overnight. It takes years of educated, diligent and disciplined buying.
Cheers
Stu
ASIC campaign to stamp out illegal access to super schemes
Tuesday 21 September 2004
The Australian Securities and Investments Commission (ASIC) is conducting a nationwide campaign against illegal early access to superannuation, working closely with the Australian Taxation Office (ATO) and the Australian Prudential Regulation Authority (APRA).
This campaign follows a joint warning issued by ASIC and the ATO in February to be wary of schemes that falsely claim that consumers can withdraw their super, or use a self-managed fund, to pay off all their debts, to meet everyday expenses or for purchases such as a family home. These schemes typically involve substantial payments to the scheme promoter to gain access to superannuation savings.
‘We are concerned that people’s hard-earned retirement savings could end up in the pockets of these promoters’, ASIC’s Executive Director of Financial Services Regulation, Mr Ian Johnston said.
‘ASIC is determined to stamp out these illegal schemes and has formulated a three-pronged approach, involving enforcement, compliance action and education to protect consumers and improve standards in this area’, Mr Johnston said.
In the last two months, ASIC has tested over 50 companies and individuals for compliance with relevant financial services laws. A number of these compliance checks are ongoing. The activities detected under ASIC’s campaign have raised concerns about:
misleading conduct or statements (including advertising and promotional material) inducing people to dispose of their existing superannuation interests and establish a self-managed superannuation fund (SMSF); and
unlicensed financial services, including advice and dealing in financial products.
Generally speaking, to comply with the law all members of a SMSF must also be the trustees of the fund (or the directors of a corporate trustee).‘Promoters will often market SMSFs by saying that superannuation is ‘your money’ which can be transferred into ‘your bank account’. This may mislead people about their obligations as a trustee of a SMSF’, Mr Johnston said.
As a trustee of a SMSF, a person must keep the assets of the fund separate from other assets, manage the assets in accordance with strict investment rules and operate the fund for the sole purpose of providing retirement benefits.
To educate the community about these schemes, ASIC is working with the superannuation industry to develop up-to-date information for consumers, trustees, administrators, planners, accountants and other professionals who work in the area of superannuation.
‘I am delighted that a number of superannuation fund trustees have already agreed to distribute information published by ASIC warning against illegal access to superannuation’, Mr Johnston said.
‘It indicates the level of concern the superannuation industry has about the threat that this activity poses to their members’ retirement benefits’, Mr Johnston added.
In the past four years, ASIC has initiated 29 civil and eight criminal enforcement actions against promoters of illegal early access to superannuation schemes. These actions alone account for more than $20 million dollars in superannuation benefits illegally accessed. For more information about ASIC’s enforcement actions, go to the ASIC consumer protection website, FIDO at http://www.fido.asic.gov.au/super
Cheers
Stu
Development lenders will normally lend 70% – 76% of end value or 80% of hard costs. Development lenders are short term funders so you will need to have “take out” finance once the development is completed and leased/operated.
NAB has a similar “policy” about investment lending. It’s nonsensical and has never actually impeded any of my clients. I just ignore the policy and always ask for 80% – no problems.
With regards to using a broker… If your existing lender is not doing what you want or need then it may be time to look elsewhere. A broker is a good avenue.
Cheers
Stu
Dom, IMB may lend up to 75%. Its 5 year commercial rate is 8.05%. They have an application fee of 0.50% of the loan amount. You have to pay for valuation and legal fees (which is standard). See http://www.imb.com.au
Sapphire’s 5 year fixed rate is 7.70% but they only lend up to 65%. See http://www.sapphiremortgageservices.com.au/rates.asp
With regards to GST – some lenders will provide you with a 3 month overdraft to finance the GST.
Cheers
Stu
Interest only repayments are normally required during the construction/drawdown period. This is very normal. It would be nice if you could get an interest free loan but it’s not the case.
In my opinion, it was naive of you to think the loan would be interest free. I’m sure the loan documents state that loan repayments were required. Have you read carefully through the terms and conditions? Some documents can be confusing, particularly NAB’s. NAB’s documents do not state the value of interest only repayments in the documents which is really silly.
Do you have a case to get NAB to waive the interest charge? Not in your lifetime!
Should have NAB ensured that you understood the loan terms? Absolutely!
I think a good compromise is for NAB to let you repay the interest over a certain period of time (e.g. over the next 12 months). That will ease the burden a bit.
Hope that helps.
Cheers
Stu
Adelaide Bank
3 years fixed – 6.50%
Interest only – up to 10 yrs
Extra repayments – up to $20,000 p.a.
Redraw – $35 (min $3,000)
$8 per month fee
$595 application feeCheers
Stu
Yes, it looks like there has been some cheap money on the market. Adelaide Bank is offering 6.50% for 3 years and BankWest at 6.75% (they bought $100m of this money).
Cheers
Stu
I would suggest having each mortgage separate in a perfect world. However, consider the cost/benefit. I would not suggest this structure if it’s going to cost a lot to set up. There are some professional packages that allow you to set up unlimited new mortgages at no cost. These allow you to design a perfect structure at no cost.
Perhaps read an article on loan structuring – http://www.prosolution.com.au/articles/structure.pdf
Cheers
Stu
Spot on Terry.
Most analysts can’t forecast what the RBA will doing one or two months let alone 1/2, 1, 5 years!!!
That’s why I regard those BIS Shrapnel long term forecasts as having the same integrity as the “Little Jonnie Election Promises”.
Cheers
Stu
The St George Portfolio isn’t bad so long as you don’t change anything too often.
Cons
– All properties a cross-secured (i.e. one big loan with sub accounts secured by all properties).
– Break fees of $1,000 for the first 3 years.
– Fees if you add another sub-account. E.g purchasing another property would cost $100 (new sub-account) + $395 (increase) + $205 (val) = $700
– Additional monthly fees for each sub-account ($12 p/mth). I.e. 3 sub-account would cost $12 * 3 * 12 = $432 p.a.Pros
– Interest rate discount of 0.70% (if borrowing over $500k in NSW & ACT or $250k in other States).
– Very user friendlyIt sounds like other professional packages like ANZ/CBA/NAB might be better now and into the future.
Fixed rates might be ok but just realise that you’ll probably be financially worse off. It’s like paying insurance. See http://www.prosolution.com.au/articles/fixed.pdf
That’s my 2 cents!
Cheers
Stu
Be careful using low doc loans. If you declare a higher taxable income in a loan application compared to your tax returns it could come back to bite you. The ATO can check this.
Always be honest.
Cheers
Stu
If you are after financial advice I wouldn’t suggest using a broker.
Use a qualified and experienced professional.
Cheers
Stu
When I spoke to the editor about the article in July she said that the Sept issue was full already so I guess I didn’t really miss a deadline I committed to.
Kay, if I commit to doing something I will ALWAYS get it done on time. I never miss a deadline!
Cheers
Stu
Thanks Kay.
My next one is on negotiating with lenders. I think it pretty useful. I missed the deadline for the Sept issue so it will be out in Nov.
Cheers
Stu
Thanks guys.
Cheers
Stu
I made some comments about mortgage reduction people a while ago…
“There are many mortgage brokers offering mortgage reduction services and claiming they can help people repay their mortgage in half the time. The vast majority of these services are crap and they just don’t work!†say Stuart Wemyss, Chartered Accountant and director of ProSolution.“Repaying your mortgage is simply about having a low cost mortgage and sticking to a budget. Most borrowers need help with the second part – budgeting and managing their money. However, a lot of these mortgage reduction businesses do not offer any ongoing service which is essential if someone is going to change their spending patterns†says Wemyss.
“These services often recommend the use of a line of credit product in combination with using a credit card. These products can result in financial suicide for most people because it’s too easy to redraw on the home loan and overspend. Many borrowers end up with more debt than they started with because there’s no one helping them on any ongoing basis†says Wemyss.
“These mortgage reduction brokers rarely have any formal qualifications and don’t have to be licensed. Astute borrowers must ask if they should act on the advice of any unqualified person – especially with something as critical as a mortgage†Wemyss says.
“And then there are the fees! Many mortgage reduction services charge a separate fee for ‘setting up a budget’ and showing the borrower some fancy graphs. They will often recommend refinancing to another lender. They then receive commission from the new lender in the form of an upfront and ongoing payment. The existence of a [ongoing] trail commission (calculated using the outstanding loan amount) causes a conflict of interest because the quicker the borrower repays their mortgage the less commission the salesman earns†says Wemyss.
“Most borrowers are better off doing it themselves. All they need to do is source the lowest cost loan via a lender or mortgage broker. Then they need to get some budgeting help from a qualified professional and learn how to manage their money. They need to repay as much as they can as often as they can. This is sure to be a cheaper and more successful method of repaying their home loan as soon as possible†says Wemyss.
Cheers
Stu
Hi Alf
Yes, I am aware of this policy.
I would argue that if they have other cross securitised non-inner city properties then this minimises their risk and this shading shouldn’t apply.
Cheers
Stu
They will lend against term deposits and real estate. That’s about it.
Cheers
Stu
NAB are not that bad. They have some strange policies but most of them are fine. Their service (in my expereince) is fantastic. They are a very good lender.
Many brokers may not want to use them becuase they are one of the only lenders that don’t pay a trail commission.
By the Alf, every so often to post a complaint about NAB but yet you still stay with them????
Cheers
Stu
