Help with question: key finance considerations when buying first investment property?

[Pins]

Hi all, life and work are colliding!

I am working for a project for one of the banks.

2 questions:

1. how important do you think multiple offset accounts are for a person who already owns their own home, has built up modest equity and is looking to buy their first investment property?

2. what is the most common finance question for people in the above situation? Where do they most need help with information?

Help me look good please

 

[Jamie M]

Hiya

I don't see multiple offsets benefiting many borrowers. Some of my clients have a need for it - but for the most part, one offset is enough.

If they've got a PPOR debt - then link it to that.

If they only have IP debt- then link it to one of the loans (preferably the one on the higher rate).


Cheers

Jamie

 

[GreyGhost]

Hi all, life and work are colliding!

I am working for a project for one of the banks.

2 questions:

1. how important do you think multiple offset accounts are for a person who already owns their own home, has built up modest equity and is looking to buy their first investment property?

2. what is the most common finance question for people in the above situation? Where do they most need help with information?

Help me look good please

Jamie's post answers this.
In addition, question to ask is whether client really needs offset in the first place.
I see clients with little or no savings, not using credit card interest free days and not having salaries and rent deposited into offset accounts to begin with.

So there is:

1. The want of an offset account
2. The need for one (PPR debt or IP debt)
3. The ability to utilise one (savings, salary, CC use)
4. Knowing how to use one (education)

 

[Terry_w]

Hi all, life and work are colliding!

I am working for a project for one of the banks.

2 questions:

1. how important do you think multiple offset accounts are for a person who already owns their own home, has built up modest equity and is looking to buy their first investment property?

2. what is the most common finance question for people in the above situation? Where do they most need help with information?

Help me look good please

1. Really only 1 offset is all that is needed.
2. How to split the loans to make sure interest is segregated for different uses

 

[Peter_Tersteeg]

Usually only one offset account is required, but the ability to have one per loan account within the same package is very useful. Most borrowers wouldn't need it though.

What is useful is the ability for the offset account to have multiple sub-accounts. This way people can have their primary day-to-day account, then sub-accounts to save for things like annual bills, long term savings, holidays, etc. All sub-accounts offset the same loan. The CBA and Suncorp have implemented this very well.

Another useful feature is the ability for loan accounts to make lump sum payments to a third party account, perhaps with some additional level of security. This would eliminate the need for borrowers to use a LOC account for holding equity. Not only is a LOC expensive, but the way they're operated by many people actually introduces the likely hood of them contaminating deductible debt. This is something Westpac does better than most.

 

[Brady]

Jamie's post answers this.
In addition, question to ask is whether client really needs offset in the first place.
I see clients with little or no savings, not using credit card interest free days and not having salaries and rent deposited into offset accounts to begin with.

So there is:

1. The want of an offset account
2. The need for one (PPR debt or IP debt)
3. The ability to utilise one (savings, salary, CC use)
4. Knowing how to use one (education)

This was a great response.


Multiple offset accounts can be excellent if used well.

I have offset account for

- Each Property
- Long Term Savings
- Short Term Savings (slush fund)
- Everyday Spending
- Bills

All of these offset accounts are all linked up to PPOR Loan (well it's an IP at the moment, no current PPOR this loan will be PPOR in future). Bills account has a autopay set up to pay credit card due balance at end of the month maximising interest free days.

 

[Pins]

Thanks all, some really useful information here.

What finance related information guidance (e.g how to refinance) do you think people in this situation would find most helpful?

 

[Peter_Tersteeg]

Thanks all, some really useful information here.

What finance related information guidance (e.g how to refinance) do you think people in this situation would find most helpful?

There's so many possible answers to that question it's virtually impossible to answer. The best answer I could give to a new home owner or investor would be, "Check out the Somersoft forums."