Current I.O. products How much?

[Denise]

Hi Rolf,

After some "out of work set backs", I now have a full time job again (at only 1/2 the previous money), but never mind - great people to work with and thats important. I am selling an i.p. next week, (very heavily negatively geared) looks like the tenant is keen to buy, and private sale is good for me, want to put current ppr onto a I.O. loan with L.O.C. facility - what are the going rates approx around the place and set up costs - current I&P loan with heritage. House value about $530,000 - loan amount left owing $170,000. Will then be looking for more nuturally geared properties. Any info gratefully received.
Denise

Why cant I put these little icons in the text where i want them to be? Hint: my new job is not in IT!

 

[Rolf Latham]

Hi Denise

Assuming you qualify with your non IT job, the most cost effective thing around for your needs appears to be:

1. Westpac Premier Advantage 5.97 %
2. Similarly ANZ
3. Bankwest 5.57 first year rolling to 6.07

Note though that the application needs to be framed right because many will NOT give you an IO loan on a PPOR debt.

And a few other deals. The Westpac deal tends to be the best because:

1. You can get a true LOC at that rate
2. The 5.97 rate applies to any loan or combo of loan > 250k, whereas with ANZ only SINGULAR loans > 250 k qualify.
3. There are NO resrictions as to the number of mortgage products under the one $ 300 per year annual fee.

I would go and see a good independnet broker to go over your options.

Ta

Rolf

 

[PIppety]

Hi Rolf,

I keep seeing LOC mentioned everywhere ? Can you explain what it is and how it works - seems popular.

Thanks
PIppety

p.s. sorry if this is a silly question

 

[Rolf Latham]

Hi PI

Silly question ? Why ?

LOC = Line of Credit

A true revolving line of credit has some unique features that separate it from a normal term loan.

1. A term loan as its name implies has a fixed term, say 25 or 30 years. You can get say a 5 year or 10 year interest only term, but beyond that most products reduce in loan limit so that by the end of the term the loan is fully paid off.

A RLOC on the other hand has an evergreen loan term. That is that the limit does not reduce over time, you can pay the thing down entirely and then redraw back to the original loan limit with no limits.

Commonly flogged as a mortgage or debt reduction tool, LOCs often have the exact opposite outcome for those with poor money control habits.

My general dislike for this type of product is well known mainly becasue they can sterilise your tax deductability if you pay them off quickly and then redraw funds for private purposes. Also, until recently they have been more expensive.

Most of the LOCs on the market are actually NOT true Locs, they are fully drawn advances on term loans with redraw.

Hope that helps

Ta

rolf

 

[PIppety]

Thanks Rolf,

I thought this might have just been a terminology thing. So, it's the same as an Equity Access Loan ?

PIppety

 

[Rolf Latham]

Hi PI

LOC is the Home Brand term, depends on whose lenders product you are describing though.

ta

Rolf

 

[Denise]

Hi Rolf,
Many thanks for your quality info as always - will be seeing ya when the I.P. is sold.
Thanks again
Denise