Hi,
First post here and though about using a residential home loan combined with investing in shares I guess it's on topic. I have a margin loan and have been investing in shares for a bit but still trying to get to grips with the terminology used with real estate loans to express what I think I am after:We wish to purchase a house, and use the something like a line of credit to use the increasing equity in the house available to purchase shares as we go.
For this to work smoothly we would need the interest on this portion accounted for in a seperate statement to keep the ATO happy. This is what it appears to me a "Line of credit" type loan is for, at least according to the promo blurbs. For example after 1 year I have 40K in equity and can access that (interest accounted for seperately), after 2 years I may have 60K in equity available, and so on.I have spoken to one loan provider and they indicated this is not how it works and I would be better off with a more normal home loan plus an additional fixed line of credit that can't be easily increased, and that for most mortgage products any accounts into which the loan is divided are at fixed amounts that are chosen at the start of the loan and difficult to change afterwards (dont expand to suit the equity available), though this seems odd to me in 2007 in this era of automated calculating devices being available to assist with interest calculations, etc.
->Are there any product classes that match the description of what I am after? Or have I misread the capabilities of the loans on offer?
->Is there any other approach which will give me this kind of flexibility?thanks.
Hi ARP
You are half way there.
There is nothing stopping you taking out a new loan to say 95% LVR on your home by way of a LOC and as the property value increases and the debt reduces utilising the new equity available for share or investment purchases.
As this would be a separate LOC to your main home loan you may need to have the property revalued to show the increase in equity and also be able to demonstrate sufficient income to support the increased borrowing.
A bit of documentation and you are there.
Normal mortgage stamp would apply to the increased borrowing.
Richard Taylor | Australia's leading private lender
In an ideal world your LOC would increase in line with the value of the house, but that is not how it works. You will need one loan, and then wait for the value to increase. Then you can apply for a separate loan, or a split. This can be a LOC or standard IO loan, but would be separate to the other for tax reasons. As the proeprty value increases further, you can then apply again for an increase. More fees, usually, each time as well as serviceability checks etc.
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
OK, thanks guys for the input! It's starting to get clearer for me now.
Looks like the "just simply" overviews of this type of arrangement don't count in the inherent hardlimits in current lending products. I might just apply for splits at certainthreshholds of accumulated equity (maybe every 40K or some other suitable slice).
For example the "ratebusters" product I have been reading the brochure on allows up to 10 splits after settlement for $100 per split.regards,
A.R.P.
Hi All,
This is a query for all the Melbourne investors. I am new in Melb and looking for a good mortgage broker. If anyone knows of a good broker they have used before, I would really appreciate some suggestions. I fully understand that you cannot guarantee their services, but just looking for some help or else it is the yellowpages for me. Preferably I would prefer suggestions for a broker someone has actually used, I appreciate there are some brokers on this site who would love to get a new client and who may be very good at what they do, however for now I would be looking for a recomendation from a satisfied client. Thanks, Getloot.
I am sure that Terry who has already answered a question here will have many satisfied clients from the forum.
He is is only in NSW why not shoot him an email.
Richard Taylor | Australia's leading private lender
Well it's now months since I first posted this query.. and I have gone with Ratebusters, I found a place and have purchased, now we are in that strange no mans land between paying down the deposit and settlement, let's see what happens.
Getloot
Alistair is Melbourne based and a regular contributor to this forum. I am sure he could list you a few hundred clients who are satisfied with his service.
Why not shoot him an email and get some professional ideas.
Richard Taylor | Australia's leading private lender
Hi,this is alora.I am here to be informed to the details about Equity Credit loans.HEL or home equity loan is a loan where the collateral for a loan is the borrower’s equity of their homes. Home Equity is considered the value of interest which is unencumbered for the property.Equity finance in simple terms is the sale of shares or stock to investors. This can be done through the stock market, to new investors and old existing holders of the shares.
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aloraHi Random
Glad you have found a suitable property.
Must admit wouldnt have personaly used Ratebusters who are a non bank lender in this climate as for any home loan you need flexibility. Many Bank lenders offer a 10 split product at no cost and the mortgage insurance and early repayment fees are a lot less.
Anyway as long as you are happy thats all that matters.
Richard Taylor | Australia's leading private lender
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