new to the forum finance question..

[2fast]

Hi guys,
im new to all this stuff butmy current situation....I jsut bought a small house(ppor)property 320k my loan is 257k 80% lvr and i have some cash as a buffer.
aprrox 30k.. within 1 year i wish to convert it to an (IP) but thats down the track and im working on small renovations which might help rent it at a better rate...

anyway i wish to use some of my cash and get some managed funds and margin this at about say 50%..

one reason i wish to have my cash wokring for me and have some potential for growth.

But my quesiton is would it be better left just purchasing some manages funds with no margin.. that way increasing my income and my servicablitliy wont be affected to purchase more property in the long term...

I just want to know if by taking out a margin loan would affect my borrowing capacity in the future for the purchase of potential second (IP) :)

any answers would be greatly aprreciated.

[Rolf Latham]

Hiya 2 fast

Welcome

A bit depends on your income of course.

The Margin lend will be smallish and probably wont make a huge impact.

I suppose you could always sell down some of the growth in a years time, and reduce the loan if required

ta

rolf

[Gabriel Conroy]

Not only gains can be magnified but also losses if things head south. This is what happened to me big time and for this reason I now shy away from MLs. My experience is that at best it's a long term strategy (to ride out the bumps). And there's rarely talk about what is going to happen to funds if something 'big' ever happens, particularly in the United States. The optimists say that these are just oportunities to buy in low in the market. And is now the best time to be levering into the market if it is fully priced or near being fully priced?? Each to their own I guess. Gabriel.

NOTE: This is not specific advice.

[2fast]

thanks for the replys.


Rolf can i ask another question for investment property they take into accoutn how much rent we get to service the loan ,
when we take a margin loan is this catogorized in the same place and do they take in apporximate dividends as income?



Gabriel yeah i was looking at managed funds for the long term and i suppose this is why i ask the question would these loans affect me in getting more investment loans for property. becasause i dotn really want to sell anything unless i have to as they would incur transaction costs. and this wouldnt be good if it were a short term thing..

[Qlds007]

Most lenders will take into consideration between 70 - 80% of the Gross Rent for serviceability.

In addition many lenders also add back the negative gearing benefit to increase the available amount to borrow.

If you considering renting the property out next year why not consider converting the loan to an interest only loan and linking it to an offset account.

Then if you decide to rent the property out you can utilise the funds in the offset account as deposit on what presumably will be a PPOR and in turn switch the offset account to this loan.

If you decide to stay put you can either reduce the loan balance or merely leave the accrued funds in the offset account savings you interest.

Remember that with most lenders you receive the same amount of interest as you are paying on your mortgage and that it is Tax Free money.

[2fast]

thanks,
ive actually got savings account which i recently linked to the loan under an offset.

do you know if they take into acount distributions from managed funds..?

[Qlds007]

You can deposit any form of income or savings into an offset account.

As long as the loan is structured as an interest only loan with an offset a/c you can access the funds at any time andwill be saving along the way.

[Medine]

Hi 2fast,

Lenders will generally take the income from dividends and growth in to account when considering your margin loan. Often they will ignore the margin loan's impact on your serviceability because they will see that it cancels out any cost.

What are you goint to do for cash when you go to buy your second property? Won't you need the money in the margin loan as cash anyway, as a contribution towards the new property's cost? So you'll have to sell up your managed funds anyway? Or do you have other funds?

Cheers, Medine.