Need help with structuring

The person possibly suggested a LOC to enable paying interest on the investment with money from the LOC.

If you wish to extend your borrowing capacity as far as possible, I would be inclined to suggest you keep away from the likes of Macquarie for now. Try and stay with the major banks at 80% or less. Avoid the mortgage insurance companies altogether.

Try to borrow in single names rather than joint if possible. This will preserve and extend your No Doc borrowing capacity for later on if you hit your serviceability limit.

With fixed loans it is impossible to tell you in advance what the exit fees will be. It will depend on the rates at the time you exit. If the rates are higher, the bank will not lose out, so the exit will be low or possibly nil. This is because they can make more money by lending the money out at a higher rate after you pay back you loan.

But if rates have dropped, you could be up for highish exit fees, depending on how far the rates have dropped. So what you save on interest could all be eaten up. eg. I once sold a property that had a fixed loan, my exit fee was around $2000 on a $90,000 loan.

Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe” in subject line.

Macquarie are good, but they are securitised lenders which means all over their loans are mortgage insured. even LVRs of 1%. Macquarie usually pay the LMI so the client may not realise.

If you wish or need to start using No Doc loans you have to plan ahead. Virtually all No Doc (and Low Doc) loans are mortgage insured, even the ones with the big banks. There are only 2 major LMI companies and they have restrictions on how much they will lend. They also have policies on not approving your No Doc loans if they know your income and you cannot service. eg. If you declare a $50,000 income with, say, Macquarie on a full doc loan application, then go to RAMS and try to get a No Doc loan, you don’t have to give your income details. But if you actually need $51,000 income to service, the RAMS mortgage insurer maybe the same as the one with Macquarie, and they will know your income and they will have to decline your loan because they know you cannot service.

So that is why I suggest using the big banks first where possible. Try to avoid LMI. Then when you hit the limit, start to use No/Low Doc loans. If you were to do this, start borrowing in one name only (not jointly with a partner). This will greatly improve your borrowing ability.

Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe” in subject line.