Where can I find out some fairly straight forward information regarding line of credit that is easy to understand and applicable to property investment?
Thanks
BrettAsk here.
Talk to a broker.
Talk to a lender.
Thats it you can contact one of the brokers here or ask the questions here
Brett what is it you are trying to find out ?
Richard Taylor | Australia's leading private lender
What I would like to know is how they work. They do not work as a standard loan, and the I believe the money can be used for anything. So how do you keep investmentmoney away from other spending.
What sort of proof do you need to retain regarding the use of the funds?
Is the Line of Credit secured against a single property, multiple properties or nothing?
Is it feasible to have a Line of Credit taken out on a currently owned property. Use the funds as the deposit and fees for another property. Would the mortgage on the second property also come from the Line of Credit or is it better to get a seperate loan. And in this scenerio, is the interest on the Line of Credit for the Deposit and fees also tax deductible on the second property provided it is an investment property?
Thanks
Ok one question at a time:
1) What sort of proof do you need to retain regarding the use of the funds?
A) Normally very little evidence all depending on the amount of funds you are applying for. For say a $100,000 Line of credit with funds to be used for investment the purpose of the loan would "Investment Purposes".
2) Is the Line of Credit secured against a single property, multiple properties or nothing.
A) The LOC can be secured against one single property or multiple properties but is always secured.
3) Is it feasible to have a Line of Credit taken out on a currently owned property.
A) Yes this is normal and can a good way to structure a investment portfolio.
4) Would the mortgage on the second property also come from the Line of Credit or is it better to get a seperate loan. And in this scenerio, is the interest on the Line of Credit for the Deposit and fees also tax deductible on the second property provided it is an investment property?
A) Normally you would (subject to equity or LOC limit) look to take a loan of 80% of the property purchase / valuation secured against the IP you are purchasing and then use the LOC to cover the 20% deposit and associated acquisition costs.
The total amount of the interest would be a deductible expense as it is the purpose of the funds that is the qualifying criteria for a tax deduction and not where the loan is secured.
If any of the funds are to be used for personal purposes then make sure you utilise the split LOC facility offered by most lenders.
You would set the LOC up in varying splits with the first split being for personal purchases etc and then the 2nd for IP property # 1 etc etcRichard Taylor | Australia's leading private lender
Thanks Richard,
Two follow-up question.
1. If I take out a line of Credit on a property I have the title for, will the line of credit provider keep the title until such time as I close the line of credit.
2. If I have a Line of Credit with a maximum value of $100,000 is their a minimum I have to draw from it, or can the balance be '0' either because I haven't drawn any moey, or paid back the outstanding amount?
Thanks
Brett
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