line of credit

Hi Chris,

Yeah I have read the book you were discussing, by Margaret Lomas and know what Line of Credit you are talking about.  There are actually a number of banks and lenders that have this type of facility available but there are always subtle differences in the products and it depends on your situation and where you want to invest, which will determine which lender to go for. Give me a call or drop me an email with some more details of your situation and I'm happy to go through the options with you.

Cheers

Matt Centrone

Investor Finance
[email protected]
Direct Line: (08) 81325913
Mob: 0402 278 019

I've read all Margaret's books (several times) and am a big fan, and a Destiny Finance Client. The organisation is pretty good.

I have the St.G Portfolio LOC loan, and up until now it has been fine. St. G also have a high rental assessment towards servicability which is good (80% from memory). Current interest rate is 7.92% for the product if you are a Gold Client.

You can split it into as many sub-accounts as you need to keep the accounting clear between personal and investment. Each sub-account will incure a monthly fee of $14, or you can pay a lump-sum fee per year, which is cheaper.

As per Margaret's view, which is very pragmatic, she advocates only having 2 sub-accounts: one for everyday personal use, and one for all investment, which you can lump all the properties into together. This will minimise the fees of course.

Her software program allows you to split the interest and allocate it to each property.

This will draw criticism from the anti cross-collateralising camp no doubt. I don't know that there is any real disadvantage or advantage doing it this way, other than the fees.

You can adjust the llimits up and down accordingly when you buy and/or sell a property, which makes the whole loan process easier, and just pay the loan stamp duty difference, or get credited it as the case may be.

The only problem is you will probably run out of servicability at some point, which we are experiencing now, but this was due to a land purchase that has no income.

So, it's time for us to switch banks; again. Pity.

Much the same as an interest only loan, except you don't have to draw down the total limit, and you only pay interest on the amount you actually use.

Most LOC's can be didvided into a number of sub-accounts for easier accounting between the personal use and the investment.

They are usually very flexible in that you can make unlimited draw downs; some have a minimum limit amount that you have to draw down.

You can pay off the principal in any amount and at any time.

Generally, the rate can't be locked, but I've heard that some lenders will allow you to do that now, except you can only lock in the amount you've already used, you can't make extra repayments on that locked amount.

You basically only keep the LOC on the amount left that you haven't used in your limit yet. Not much value unless you still have a lot of unused funds in the account.

Richard is right ..

There are a few that allow up to 20K – but only during the lock period … I see NAB also have a similar LOC portfolio arrangement that, apparently, allows a full offset (which seemed odd in an LOC – to me at least – anyone else know anything about that one?)

and Marc … would be interested in hearing about how or what one does to become a gold client .. 7.92 doesn't seem too bad .. I'm about 6 months away from review methinks ..

Rob

Frosty

It is a horses for courses decision.

I prefer the offset option but there are other reasons for that and would need more information to advise you properly.

You would only use a LOC with a separate sub account for each purpose.

However as been mentioned before an offset account allievates all of the potential issues before they happen.