all,
coming soon we will receive some shares as an inheritance from family. as we currently have an IP with a P/I loan and used family as guarantor for the 20%, are we able to use the shares (which will be in my name) as security for the remaing % to make the 20% security required by the bank, and hopefully release family as guarantor?
our accountant has said this is possible but was wondering if anyone else has experineced or heard of this?
this will allow family to be released as guarantor whilst allowing us to maintain the shares as another form of investment withiout selling them and paying the $ on the loan….
[buz2]
It is only your thoughts that create your future – Be careful what you think!
I have never done this with a lender before.
One idea might be to take out a margin facility against the shares and use the funds released for a deposit.
This is a higher risk strategy and you best discuss it with your accountant.
Cheers,
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Sounds like a double whammy. Future Gain from the shares and taking total control of the property.
Put the shares away in the cupboard until the property increases 20% and then release the shares as security.I think Mortgage Hunter is correct in that shares can generally only be used as security for a margin loan.
Margin loans carry a higher interest rate and then there’s the margin calls…
If I was going to take a margin loan on the shares I’d use the proceeds to buy more shares (high yield) just for the sake of diversifying my portfolio and earning a bit more. Wait a couple of years for the share and or property to go up then re-finance the family out of the equation.
Being guarantor is not so bad (I’m one myself) as all being said and done property is a fairly secure asset and if you can’t keep up the payments (and hence indebt your family) you certainly couldn’t keep up the payments on the margin loan.
Of course you can take out lender’s mortgage insurance and refinance up to 100% (or less if you have the spare money) and the cost may well be covered by any dividends your shares pay.
of course, if your property has gone up in value, you may not need other security now.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Margin lending is considered a high risk strategy.
A better alternative would be to have your IP loan changed to interest loan (who knows why it is P&I) and only make interest repayments. I would then direct all additional income from work, rental income AND dividends from shares to the loan secured against your family home to pay it down asap.
Once the equity in your IP is sufficient, I would increase the IP loan to pay out the balance on your family home.
There is more risk associated with margin lending than there is benefit.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksOriginally posted by The Mortgage Adviser:Margin lending is considered a high risk strategy.
There is more risk associated with margin lending than there is benefit.
[purple]The Mortgage Adviser
While this may be the case for most people , for people who put the time in to learn about shares , and can show they can consistently make money out of shares, then it is an option worth exploring.
See, I think you mean while this is ‘always’ the case, risk can be minimised by spending a lot of money, hours, days, weeks, months, etc becoming skilled in this area.
Hardly a viable solution for someone who inherited shares and no apparent previous experience dealing with them.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksTMA,
correct. i have no desire or time at the moment to even think about becoming a share trading ‘guru’ and would not see this as a viable solution for us – at the moment.
when the shares are finally transferred to my name i may call on you The Mortgage Adviser with advice on how to re-structure our current loan to make it a bit more financially viable and to gain control for ourselves without the use of guarantor. [bonjour]
It is only your thoughts that create your future – Be careful what you think!
Originally posted by The Mortgage Adviser:See, I think you mean while this is ‘always’ the case, risk can be minimised by spending a lot of money, hours, days, weeks, months, etc becoming skilled in this area.
Hardly a viable solution for someone who inherited shares and no apparent previous experience dealing with them.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksRob , I agree that this is not appropriate in this situation .
However I would disagree with your original statement , namely
There is more risk associated with margin lending than there is benefit
and also with your use of the word always.
Part of the appropriate use of gearing ( and any trading ) involves use of risk management strategies such as position sizing relative to the overall portfolio size and stop losses. If these are done correctly , then I believe that there are people out there who can use gearing in a way where the benifit does out weigh the risk.
I’m not saying I’m one of them , but I know people who I would fit into that catagory.
I’m still trading with an ungeared portfolio and when I’m happy that what I’m doing works over a longer time frame , then I’ll consider gearing.
See Change
No problem. Many people here can also help with some great advice.
Good luck with it all in the mean time.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksOnly one way to find out,ask the bank.If the shares themselves can be used as security without a margin loan then fine,but margin loans are designed to buy more shares & the interest will then be tax deductible.If you use the margin loan for other purposes the interest is not tax deductible.
Hi Coalfinger
Sorry that is incorrect.
By taking out a Margin Loan and not using the funds to purchase more shares will certainly NOT mean the interest is Tax deductible.
It all boils down to the “purpose of the funds”. If the funds are to be used for “investment” the interest will be deductible.
Cheers
Yours in Finance
0-40 Properties in a decade. Ask me how.Richard Taylor | Australia's leading private lender
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