Line of credit

Viewing 5 posts - 1 through 5 (of 5 total)

PropertySeeker
Participant
@propertyseeker
Join Date: 2006
Post Count: 43
June 28, 2009 - 11:15 am
Hi everyone,
I'm thinking of opening a line of credit, using as security 3 investment properties. And then drawing money out of this LOC to make deposits on new investment properties as I want to buy more. Can anyone see anything wrong with this approach?
Also, when drawing money out of a LOC, do i have to justify it? or the bank doesnt care as long as I pay them their interest?
Thanks
PropertySeeker
duckster
Participant
@duckster
Join Date: 2004
Post Count: 1,674
June 28, 2009 - 12:28 pm
The bank will most likely lend to 80% LVR on your existing investment properties. (and you need to be able to service the new total debt amount)
Also if you go for another loan the new lender will want to know your existing debt and will factor this with your income so see if you are able to service the new loan.
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
June 28, 2009 - 9:42 pm
No the strategy is sound and as long as the loans are separate i cant see a problem.
Richard Taylor | Australia's leading private lender
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
June 29, 2009 - 3:19 am
One potential problem is that the 3 properties will be cross collateralised. Better to have 1 LOC on each – but this may not be practical if you have a little bit of equity in each.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
St George Dragon
Member
@st-george-dragon
Join Date: 2009
Post Count: 5
July 1, 2009 - 12:30 am
May i suggest you keep a separate split for each investment property purchase, this way , you can apportion the deductible debt to the correct property that you purchase.