Equity release, Offset or Line of Credit?

And I should point out the best solution and that is a term loan which allows payment directly from the loan account. Westpac Roket loans for example.

Hi,
Not sure why your untrusting of the broker whose opinion is that a LOC would be appropriate, other than to say he didnt elaborate as to why he is suggesting it sufficiently for you, for mine this is problematic

In virtually all circumstances nowadays as a broker and qualified non practising FP i suggest LOC. Here are some key reasons why

1. Keeps your investment loans separated and easier to track for accounting purposes.
2. You absolutely wont pay interest on the LOC until such time as you utilise the balance, ill elaborate as to why im saying this later on
3. The alternate method of setting up a secondary loan is an issue from my perspective, and not only for the mixed purpose problem, but because its finite. Id much rather the LOC as the limit can be more readily increased as time goes by as opposed to releasing constantly for further investment (meaning i have to reapply in full each and every time im looking to release equity, yes you can say the same of the LOC to a degree, however by increasing a LOC you only have the one account not 2 3 4 5 6 as time goes by and your reaching back into the initial property to fund further purchases).

Point 2 i make because different banks have different ways of operating accounts. Even if you have a io loan with the full balance offset, you can be forced into making payment, odd i know, however i have seen it.

The biggest reason however is the changing landscape of the marketplace induced by regulatory change. You will be aware (if your not you should be) that banks have had imposed on them 2 significant brakes in terms of investment lending via our regulators.

1. No more than 10% of all new business they write can be for investment purposes.
2. No more than 30% of ALL loans they write can be on an interest only basis.

The 30% rule i actually see as a bigger problem, because it could make 80-90% of the property most investors buy significantly less attractive. Why because most people buy negatively geared property and should they lose the ability to gain an interest only loan it would make it much more difficult to buy and hold. Now, virtually all banks will at some point push to these limits and have already for point 1, a matter of time for point 2.
The way they have responded has been to either decrease max LVR or by increasing price, or a combo of both, simply put, releasing equity is going to become more and more difficult and costly, particularly once the bigger banks start pushing the 30%. The way to avoid this is to take a product from the bank that inherently has the exact characteristics you desire. Some would argue yes thats a solution but a more costly solution (rate), to that i say the IO rates are already high and likely to continue rising, however, if that bothers you considering where the rates are at the moment, then perhaps investing is not for you. The interest rate you pay on an investment loan in my opinion is somewhat irrelevant, as long as its market competitive, of far more concern is the right asset in the right market at an appropriate time for you personally.

Basically, LOC is the way id set it up for all the reasons above.

Cheers