We are currently looking atrefinancing our IP’s with a line of credit loan.What are people’s opinions of Line of Credit. Is it as great as it sounds or are there hidden dangers associated with it ? [?][?][?]
Cheers
Hi again Bronny,
A LOC is the second best thing to sliced bread. If you have 20% by way of equity or cash, go for it. The third best thing is a product I am using, described to me by my broker as a “Quasi-LOC”. It’s a mortgage reduced by 0.5% of the market rate, with an off-set account and a 55 day interest free credit card attached. Annual fees of $295 secure the 0.5% discount.
Your LOC is even better than this, as it is based on the valuation of your property, as opposed to purchase price.
You will quickly learn that you become your own bank with a LOC. The only negatives that I hear about are the possibilities of higher fees and perhaps interest rates also.
I’m sure you will, but if you don’t hear from MelBear, Billfromoz or Simon Macks on your question, please ensure that you persue both of them for an overview. They will be able to explain the pros and cons in far more educated hands-on detail.
Just make sure your broker or branch mananger is wearing a suit at the time of consultation!!
Kind regards, Phil
Hi Bronny
Using a line of credit correctly can be a valuable tool in wealth creation,
However, if misused a LOC has the potential to eat away your equity.
Regards Steven[email protected]
http://www.mobilemortgagemarket.com.au
Ph: 0402483216Bronny, definitely check out all the costs of running multiple loc accounts.
My strategy which I’m about to implement is to refinance all IP’s, up to 80%, and have the extra $$ sitting in only one LOC. Saves on costs, and is easier to transfer/write cheque from one account than from multiple. It also gives me the option of fixing some of the IP loans if that’s what I decide to do, and I get a rate that I want.
LuckyPhil, I just asked my bank manager for 0.5% discount, and didn’t have to pay a yearly fee for it!
Cheers
MelSorry if this is a dumb question but is the interest charged on a LOC account used for investment purposes tax deductible?
Thanks
ShirleyG’day Shirley…
Where you been?
Yes the interest is tax deductible.. no ifs buts or maybes.
Cheers
Bill
Bill O’Mara
Real Estate,Mortgages, Option Writing & Forex. [email protected]Bronny..
fixed our intrest rates on 2 ip’s and 100k fixed on PPOR and 58 variable on LOC, 3 properties through 1 bank reduced fees and good deal, CCard automatically deducted from account at appropriate time so no fees, use the ‘points’ to redeem Myers vouchers, so “X-Mas Shopping” for free [
]We’re happy !
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Hi Redwing,
Can I ask why you fixed your Ips and not your PPR?and does your lender hold all Three properties as security?
Kind Regards Steven.[email protected]
http://www.mobilemortgagemarket.com.au
Ph: 0402483216Mobile-mortgage
Sorry fixed intrest and intrest only loans on the IP’s.pay less each month and the saving goes into paying off the PPOR, No tax benifits with the PPOR loan so trying to reduce it as quick as possible.
The PPOR we Fixed 100k (thinking intrest rates were at a nice level and probally wouldn’t drop but rather rise[
] and they have, admittedly only 0.25% so far)
The remainder of the PPOR loan was left variable giving us some leeway to reduce it quickly.Why ??
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Hi Redwing,
I,O loans on IPs, now I see why,[] well done,Regards Steven.
[email protected]
http://www.mobilemortgagemarket.com.au
Ph: 0402483216Arrggghh!!! I’m confused!
Just finished talking to broker regarding accessing equity in my IP to buy land. Asked about just extending the IP’s mortgage so I can redraw equity as required or using LOC. Ended up with the redraw option because of 2 things. Firstly the interest rate on my mortgage was as good as the LOC’s he showed me (6.2%) and secondly the establishment fee for LOC was between $500-$1000 and the redraw option was only $400. Have I done the wrong thing? I only have one rental IP, one block of land which will eventually become PPoR and want to buy another block of land.
Namasté
hi all
sorry to do this but i disagree with most of the comments, LOC’s are a con, hugely profitable to the bank and the benifits are over estimated. as Namasté discovered there are better options.
Discount loans can be sourced much more cheaply, with lower interest rates (-1%), no application fees, no account fees, no valuation fees, no redraw fees and a very cheap loan discharge fee. in the long run you are way ahead of any LOC i have looked at. Yes a small LOC can be helpful if used correctly (but don’t pay application fees some cost $4000 and more). i have only 1 property in my LOC the rest are with discount mortgages.
regards westanHi,
I’m new to this. Could someone please fill me in ? IP ? PPoR ? PPR ?
thanks
Hi,
I’m new to this. Could someone please fill me in ? IP ? PPoR ? PPR ?
thanksHi lazyboy?
Confusing hey! Still getting my head around it all too. Anyway these ones I know.
IP = Investment Property
PPoR = Primary Place of Residence (ie your own home)
PPR = PPoR but too lazy to type the “o” []Regards,
NamastéHi Namaste,
thanks for the help.
Finding it interesting learning where your Aussie property market is at ! In NZ we are at a earlier stage of the boom cycle.hi lazyboy
your market is hot !
i’ve been buying there and prices have risen every time i get there (every 10 weeks). where abouts are you in NZ. i’m moving to Balclutha (brrr i feel cold just thinking about it) on Dec 31st.
regards westanHi Westan,
I’m from New Plymouth, westen side of the north island.Our property market was quite flat for about 5-6 years, was great for buying cashflow +ive property. ie $80000 returning $$190-210 pw were common. But pretty hard to match deals like that now !!! Capital growth has taken over , local prices are up by about 30% on average over last 18 months. By buying in a good growth areas some of our properties have doubled in 3.5 years, not too bad for property with great cash surplus.
Southland is enjoying good growth also, still easy enough to pick up some good cash down there too. Also NZ must have some of the best tax breaks for property in the world. No capital gains tax, no stamp duty,execelent depreciation rates on fixtures and fittings. It might be cold down south , but the deals are hot.
lazyboylazyboy
yes i’ve got a few down southland i don’t know which is my best the one for 23k rented at 100pw, (now thats Positive cash flow), but i like the deal in Dunedin (Mornington) $58k rent for $170pw.
lazyboy can i ask you about an area near you but i don’t want everone buying there so can i ask you off the forum ? if your happy to answer my question email me at [email protected]
thanks
westanIt is possible to refiance your home loan and put the remainder in a line of credit that does not attract interest until it is partially or fully drawn;
It will act like a credit card with a limit that has not been touched.Mark
]
] well done,
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