Hi there just wondered if any one has any comments or feedback regarding this product. It is effectively an LOC account on PPOR with subaccount LOC for investment loans etc.
Cheers
Hi Madproperty,
I have had a macquarie LOC for nearly five years now and haven't had any problems. The only complaint was that they raised their interest rates by .3% very quickly after the US sub prime loan problems.
After that happened I did a bit of shopping around and couldn't really find a better deal as my LOC is low doc. Everywhere else I looked wanted mortgage insurance for borrowing over 60% low doc. Macquarie doesn't ask for it up to 80%.
They do have rather hefty exit fees though, but this may only apply to low docs like mine.
Just my personal experience,
SueBy the way, what's the global limit part mean?
The majority of lodoc loans over 60% LVR are mortgage insured including Macquarie Bank.
Whilst many of the retails lenders pass on the premium the interest rate is lower.
Securitised lenders such as Mac Bank have little alternative but to pay it and charge it by way of a higher interest rate.
The global limit they offer is a full x collateralised product so you can do better.
Richard Taylor | Australia's leading private lender
The Global Limit is the total limit of your borrowings. Say you have 4 "sub accounts / accounts" each with a limit of 25k your global limit is 100k. You can the adjust the limit of each sub account at anytime to fit with your requirements.Â
Financial planners are fond of the product as they can arrange for their client to grant electronic access to view their accounts when considering strategies etc.
Considering their funding arrangements I agree that there are other options to consider.  ÂMust one of the few Financial Planners who does not like the product !!
Richard Taylor | Australia's leading private lender
Thanks for that Richard, I didn't realise they compensate for the insurance in the interest rate. Although my lodoc is at a lower rate than their advertised lodoc rate – I guess I might be getting a little loyalty discount as I'm near the end of the five year penalty period!
Thanks also Trent, I do have a Global limit on my LOC between my sub accounts, I just never heard it called that before.Sue
You probably have one of the old step down rate products. Still a bit expensive in todays market but serves a purpose.
Richard Taylor | Australia's leading private lender
Very Interesting comments and thank you for your posts. The reason why I posted this question was because my mortgage broker suggested this product as a way of wealth building and debt reduction. I will try to explain below:
Â
LOC 1 on PPOR
LOC 2 using equity from PPOR to fund IP purchases IO.Broker suggested that via Neg Gearing a tax rebate would then be used to help pay down the PPOR over time, therefore increasing your equity in PPOR plus increase overall net worth via additional IP purchases as able.
Over time global limit increase due to growing portfolio CMV.
Does this make sense?? Is there a better way to build net worth and reduce PPOR debt?
Richard and Trent you suggested that there are alternatives to macquarie?? Any examples ??
Thanks again and look forward to your views.
Hi Mad
The formula your existing MB has put forward is simple debt reduction strategy and normal practice in advising clients.
My suggestion would be 2 fold:
1) Under the Mac Bank securitised facility the loans have to be X collateralised. You could easily have a similar arrangement with a other lender and keep all of the loans separate.
2) The rate of interest charged by Mac Bank on this product is not very competitive and therefore by using an alternative lender you would find the interest saving could be diverted into your PPOR loan creating equity quicker.
3) Because the loan is a fully secutised loan despite i assume you apply on a full documentated basis it means that you have used up some of your borrowing capacity with the mortgage insurers. Personally i would never recommend a client take out a securised loan initially on a fully documentated basis as you may need the mortgage insurers down the track if you go for a lodoc / nodoc loan.
4) The Global limit is all well and good but for additional purchased incurs additional costs such as revaluations, new application fees etc etc. This again can be saved with other lenders meaning more money to go into your PPOR.
Richard Taylor | Australia's leading private lender
Thanks Richard, is it too much to ask what other lenders you are thinking about to keep loans separate and at a lower interest rate??
Thanks heapsÂ
Depending on the entity you have holding your IP would determine the lender specifics i.e Pty Ltd / Trust etc etc
I can think of a couple of Pro Packs from the 5 majors that would suit with a considerably lower interest rate and set up fees.
Richard Taylor | Australia's leading private lender
Thanks again Richard, PPOR currently with ANZ LOC. Would you suggest talking with them to discuss as would be 1st IP.Â
I am keen on a debt reduction strategy asap. I think interest rate MB quoted for Mac Bank LOC was 7.68% in early Dec 2007 but extra costs of doing transactions with Mac bank would increase the costs of doing business. Yes?Cheers
Mad
Yes i do volume business with Anz and find them very good to deal with.
Only problem you may have is the local branch may have no idea how to structure the loan with x collateralising the securities.
It is not an area they have experience in.Richard Taylor | Australia's leading private lender
Who then is best to structure loans going forward. My Broker? My Solicitor? My Financial Advisor? Are you proficient in these areas Richard?
Thanks mate
Hi Mad
Yes i would like to think so.
Neither your Fin Advisor / Accountant / Solicitor would have a clue about X collateralised lending.Shoot me an email with what you have any i can tell you the best way to set it up.
Richard Taylor | Australia's leading private lender
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