Cashbonds for Dummies

if you have to play silly games to get a loan, you are getting one you can't afford.

Encouraging a couple in their sixties to do this is irresponsible.

Thanks so much for your helpful response. If you had read my earlier post, you would have seen that they are not, in actual fact, getting another loan. What they wish to do is to consolidate all of their loans with the one bank to make it easier to keep track.

FYI, not that I need to give this info, but the rental they earn is nearly $100K, and the loan repayments are around $55K.

But if they did decide that they wanted to borrow some extra money so that they could use it to live off, and I had to play 'silly games' as you so condescendingly point out, I would absolutely encourage them to do so. My worst case scenario as their kid as that the LVR on any properties I inherit will still be way less than 80%.

And before you start suggesting they sell the properties, don't bother. They are holding as many as they want in order to give 1 each to their kids.
 
Thanks so much for your helpful response. If you had read my earlier post, you would have seen that they are not, in actual fact, getting another loan. What they wish to do is to consolidate all of their loans with the one bank to make it easier to keep track.

FYI, not that I need to give this info, but the rental they earn is nearly $100K, and the loan repayments are around $55K.

But if they did decide that they wanted to borrow some extra money so that they could use it to live off, and I had to play 'silly games' as you so condescendingly point out, I would absolutely encourage them to do so. My worst case scenario as their kid as that the LVR on any properties I inherit will still be way less than 80%.

And before you start suggesting they sell the properties, don't bother. They are holding as many as they want in order to give 1 each to their kids.

If you need to create a some-and-mirrors cash flow, they can't afford the debt.

If they can afford the debt, why the need to fudge the numbers?
 
MB............not sure how long you've been investing or following the landscape, I would respectfully point out that if they sold down one or two, then it would be a far more conservative and safer income stream they may anjoy now and ultimately leave behind. I know you didn't want to hear it, however it behooves you and your siblings to understand risk management. Have you and your siblings amassed IP holdings concomittant (or well on the way) to those of your prudent parents. Be very, very, VERY careful of compounding debt at their age............posted ad infinitum here of late by me, we are in 1991. Those old enough and investing at that time will understand.

As far as leaving a legacy, I have no problem leaving behind a sucession trail to my daughter (unless she becomes a fool or marries one and, I don't suffer fools easily), however just because I can leave behind an income stream and asset base (and it is substantial) doesn't mean I wil do so without strings attahced if I deem it necessary. Testamentary trusts and so forth.....controlling from the grave. I appreciate you do not intend an inheritance slant to your post and questions here, however that's how it comes across..........sell a couple..........pay down debt..........live off rent (especially at that age) .............and, the inheritees have still got an inheritence and should be proactive enough to fend for themselves over and above this..........merely my 0.02
 
Thanks for the post Player. Mum and Dad will not sell. They do not need to sell. They are not after more money.

My point from the beginning has been that they want to consolidate loans with one bank. The debt is all in existence, and is being paid for quite easily purerly from rental income, with quite a bit to spare. Then there is the matter of their superannuation income on top of that. I've not ever said that they cannot affort it.

I have said that the bank says they cannot afford it. As they are in their 60's as I have said, the bank is calculating P&I on all loans, then adding their servicability, then taking less rent, and being extra harsh due to the age factor.

If I have to play the bank's game, or indeed a game with the banks, then so be it. The cashbond will be purchased with cash, so it's not extending borrowings at all - and it's not coming from an LOC either. It is CASH. My Dad wants to be able to log in to one banking website to see where he's at, that's all.
 
Thanks for the post Player. Mum and Dad will not sell. They do not need to sell. They are not after more money.

My point from the beginning has been that they want to consolidate loans with one bank. The debt is all in existence, and is being paid for quite easily purerly from rental income, with quite a bit to spare. Then there is the matter of their superannuation income on top of that. I've not ever said that they cannot affort it.

I have said that the bank says they cannot afford it. As they are in their 60's as I have said, the bank is calculating P&I on all loans, then adding their servicability, then taking less rent, and being extra harsh due to the age factor.

If I have to play the bank's game, or indeed a game with the banks, then so be it. The cashbond will be purchased with cash, so it's not extending borrowings at all - and it's not coming from an LOC either. It is CASH. My Dad wants to be able to log in to one banking website to see where he's at, that's all.

I suggest that you speak to a couple of brokers. Surely with a 50% LVR and not looking to increase their holdings, there is someone who can get this over the line without going to cash bonds.
 
I suggest that you speak to a couple of brokers. Surely with a 50% LVR and not looking to increase their holdings, there is someone who can get this over the line without going to cash bonds.

Whats wrong them using an annuity? Mels parents are getting paid interest from the annuity provider without any costs incurred. They are not setting up a cash bond structure, only the annuity.
 
Whats wrong them using an annuity? Mels parents are getting paid interest from the annuity provider without any costs incurred. They are not setting up a cash bond structure, only the annuity.

My understanding is that the only reason they want an annuity is because they are having trouble rolling all their loans to the one provider.

They aren't trying to purchase more property and she stated that they aren't after the extra income either.

For this particular situation it sounds to me as though merging into 1 provider could be done with a good broker.
 
My understanding is that the only reason they want an annuity is because they are having trouble rolling all their loans to the one provider.

They aren't trying to purchase more property and she stated that they aren't after the extra income either.

For this particular situation it sounds to me as though merging into 1 provider could be done with a good broker.

I have spoken with my broker, and he agreed that St George (and most if not all other banks) are also making age a huge factor at this time. St George is the only option my parents will consider. If they won't take the other two loans - of $150K and $240K then the status quo will remain.

It would be cheaper interest with St George too.
 
Why not purchase some blue chip shares which provide a 10% return



Sorry, just had to throw that cat amongst the pigeons
 
They are holding as many as they want in order to give 1 each to their kids.

I bet their favourite child is listed in the will to get the most expensive property :) but it would be interesting to see how the debt also gets inherited if the loans are consolidated .
 
I bet their favourite child is listed in the will to get the most expensive property :) but it would be interesting to see how the debt also gets inherited if the loans are consolidated .

So tell me who their favourite child is? I reckon it's my sister as she's the only one of us who's happily married and delivered grandchildren. Mum denies it of course as she has no favourite. If you have inside information please let me know?

There will still be separate loans for all properties, the plan is just to have every loan with St George.
 
I think their favourite child is the one they love and care for the most and might also get the best property. Yes mum's will always deny they have a favourite child, they've always done that. I'm not sure if it's your sister but it's often the youngest or oldest child who's secretly cherished more than the others. That would be great if st george made a separate loan for each property without any x-coll, i hope it all goes to plan.
 
X Coll isn't an issue for now as they won't be selling any, and don't intend to buy any other properties either. They have at least one property deed in their possession at the moment, and as values rise and their loans decrease, no doubt we'll keep getting others released for them too.
I'm neither youngest nor oldest, and they are very very good at not showing favouritism. When Mum thought I was serious about my sister being the favourite she got quite upset.
 
X Coll isn't an issue for now as they won't be selling any, and don't intend to buy any other properties either. They have at least one property deed in their possession at the moment, and as values rise and their loans decrease, no doubt we'll keep getting others released for them too.

You gotta love that.....I did the same. Gives one a warm fuzzy feeling for a little while, however I got sick of holding the title deed as it was dead equity so took it to another lender to get it leveraged and working for us once more.
 
While banks have a generally good idea what a borrower can afford most of the time...sometimes they are just plain wrong. If that means a bit of manipulation (above board) so be it, it's not like the parents are unsophisticated first time borrowers.
 
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