Hello All
I realise this is a property forum but I have been reading many interesting threads here that mention cash bonds. I confess to never having heard about them. [blush2]
Would anyone be willing to take the time to enlighten me please.
What are they ?
Who issues them ?
What is the return ?
What is the risk ?
Anything else worth knowing about them ?Thanks in advance. [smiling]
ElkaCash bonds are annuities. Steve Navra used to promote them a lot as a way of increasing servicablity.
basically works like this:
You buy a $100,000 annuity, payments over 5 years. each year you would get back around $20,000 plus interest, maybe $24,000pa.With some lenders you could have used this $24,000 as income even though really only $4000 is income and the other $20,000 is your principle coming back. The increased ‘income’ thus increased serviceability.
The trouble with this is the banks were only giving about 5% on the annuity, but you were being charged 7% to take the money from a LOC, so there was a shortfall.
There were also expensive fees to set it up.
These days there are many Low Doc and No Doc products out there, and these have decreased teh popularity of the cashbond method.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.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
Thank you Terry. Clear as always. [smiling]
I believe that people still use them to assist with servicing the loans; managed Funds are also popular
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating Calculators
You must be logged in to reply to this topic. If you don't have an account, you can register here.
