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From: Mike .


Choices
From: Micky B
Date: 13 Feb 2001
Time: 12:12:15

Hi all

My wife and I are purchasing our first home and are looking for some advice on the best way to structure the loan. The choice is between a line of credit (Portfolio Plus, we're with St George) or your standard ole home loan. There are 2 variables, one is that we are currently buying two IPs, one +ve and one -vely geared. The other is that we are going to rent out the place we will call home for two years before we move in. We will be borrowing the full amount plus costs.

With the cashflow from 3 properties plus my income I am strongly leaning towards the LOC, but in order to get the LVR below 80% in order to qualify, we will have to have all the properties on the mortgage. From reading this forum I know this is a big no no, but is the flexibility and the savings of a LOC worth it? I am in a secure job and have dealt with the same manager at the bank for the last 7 years. We will be desparate to pay off this house ASAP as there will be no more IPs until we do.

Thanks for any replies.

Micky B
 
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bigjohn

Reply: 1
From: Mike .


Re: Choices
From: bigjohn
Date: 13 Feb 2001
Time: 20:50:04

When insurring a display home you may have to insure the house as a business and not on landlord's policy. While you can still claim the insurance premium it may well be higher than a landlord's policy because you have a higher public liability component in the insurance. just think of all those people walking through your home you don't want them to trip and break a leg, they might sue.
 
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Rolf

Reply: 1.1
From: Mike .


Re: Choices
From: Rolf
Date: 13 Feb 2001
Time: 14:03:00

Hi Micky

Good to see that there are still Bank Managers that can still be at the same branch and not be closed down. A good working relationship with your banker or broker will be invaluable when you start to run into TWOUBLE with LVRs, rent reliance etc.

On the other hand, remember that a Manager for STG is not going to tell you there may be a much better deal around the corner with another institution.

Do yourself a BIG favour, invest some time and a coffee and have a long talk with an independent mortgage broker and see what alternatives you have, both in product and in structuring.

I am not saying there is anything wrong with STG, (one of my many lenders) it is just likely to be better for you to be informed as to who gets what.

LOC will almost always cost you about .5 % more than some of the other great deals you can put together. On a 100 k loan, that's 500 bucks a year and some prefer the flexibility of the LOC for this cost. On a 500 000 loan that works out to $ 50 each and every week, that is better in your pocket than the bank. I have yet to see many deals that can not be put together with the same effect as an LOC using a mix of different products, and not necc, all from the same lender. Some lenders are seeing the light and offering packaged equity loans at up to .6 % off their normal rate based on volume.

On the issue of sticking all your property on the mortgage, you can insist that this not happen and that they structure things SEPARATELY. X-coll is good and bad, but for someone in your pos, there are more pros than cons. The banks do like to nail things down .

It is funny that you post is called choices - try Mortgage Choice - no I am not affiliated in any way - in fact they are competition - but they are usually well trained, have a good range of product, and a good name. On the other hand ..... I have lots of products and happy clients too !

You should also note that not all brokers represent all institutions and nor could they realistically. Some lenders do not pay commission and that is what most of us live from. For example in my offering there are at least 2 holes, Commbank and NAB - they prefer to do their "broking" with their own mobile lenders. Whatever system the broker is using should still compare those loans though with what they are offering you.

Phew hope that helps.

Regards, Rolf

[email protected]
 
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Andrew

Reply: 1.1.1
From: Mike .


Re: Choices
From: Andrew
Date: 13 Feb 2001
Time: 13:56:08

I would set up a Portfolio loan with 3 sub-accounts. The IP subs would be I/O. Reshuffle these if you move. All 3 securities I think is OK provided you make repayments and you don't plan on selling any.
 
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