Is it viable to use credit card cash advance for deposit

[Cales405]

Just a thought. I am keen to buy more property and will be about $10k shy in about 3 months for the required deposit to purchase another IP. I have settlement on 3rd IP in less than 2 weeks.

The 10k will only take two months to pay off (therefore, I could wait two months later to purchase as I could save it in that time).

The reason I ask as I will engage in the services of a buyers agent (I have bought all my properties this way due to being time poor).

Now, the BA could find a property straight away, but it could take as long as six months or more (in this case I will have the funds).

I want to get the BA on the case earlier, hence the question, if he found one straight away, I could cash advance on my credit card and proceed and this would cost me about $350 in interest over two months (this is deductible anyway, correct? - I only use credit card for investment purposes)

I don't want to rush into anything if this option is not viable, but I am eager to keep on moving forward and as per my broker's suggestion, if I waited until my next tax return (3 mths later), I would have many more financial options (due to LMI and being paid on comms - I have not quite been receiving comms for two years, but will be after June this year, so mortgage insurers can be tight on 95% LVR lends)

All my current mortgages including PPOR are with one lender under a pro package and it may be time to use another lender.

 

[alexlee]

Cash advances attract interest immediately.

Why not just get a cheaper property instead?
Alex

 

[Cales405]

Cash advances attract interest immediately.

Why not just get a cheaper property instead?
Alex

As said in my post, it will only be for maximum 2 months and may not even occur, it is to be able to get the BA searching earlier and have the funds available if necessary.

How much interest will I pay over two months anyway? (not even $350, which is a small fee to pay if the right property becomes available within that time)

A cheaper property is not the answer. I am still looking at a $300k property, I will have the funds two months later to have the required deposit.

There are other options too, just weighing them all up. (ie. longer settlement, lower deposit, etc). Just need to have everything in order in case some conditions are not agreed to.

 

[alexlee]

For how long have you been able to save $5k a month?
Alex

 

[Cales405]

For how long have you been able to save $5k a month?
Alex

Almost 2 years. Soon after I got out of my own business and became an employee

 

[josko]

Almost 2 years. Soon after I got out of my own business and became an employee

Just curious, but did you change careers and work for another company, or stay within the one you sold. How many employees did you have?

 

[Cales405]

Just curious, but did you change careers and work for another company, or stay within the one you sold. How many employees did you have?

I had 4 employees and owned a successful retail store which I started from scratch for 4 years (well, it was successful for three years until technology beat me)

The industry I am in now is totally different. I sort of fell into the new role, being at the right place at the right time.

I have been employed by my current employer since Feb 06, but the current managerial position I have been in since Jan 07 within the same company.

I work on retainer + comms and being on comms is like being self employed regarding finance. Most lenders and mortgage insurers require two years of comms before they take comms into consideration for serviceability, but I found a broker who got past that for me and I have purchased 3 IPS since, plus refinanced my PPOR for extra equity to purchase the IPs.

 

[Welcome]

One idea you may want to consider is to get a cash advance on a credit card and then do an interest free balance transfer to a different card. Bankwest have just started advertising one with a 9 month interest free balance transfer.

I think I am about to max out 3 credit cards (through business EFTPOS machine) then do a balance transfer on all of them to bank west for 9 months. If I do that with $20,000 it will give me a $20k loan for 9 months. If I then leave that money in my offset account it will save nearly $1400 in interest and only cost me $166 in merchant fees!

 

[Kristine..]

Just a thought. I am keen to buy more property and will be about $10k shy in about 3 months for the required deposit to purchase another IP.

Hi Cales

This is all about planning.

If you can save the $10,000 in three months then buy with a 90 day settlement.

Use a Deposit Bond to fulfill the deposit requirement of the Contract.

Better still, negotiate a No Deposit contract. There is no legal requirement to pay a deposit. A deposit is, after all, simply a portion of the Purchase Price paid prior to settlement.

If you end up having to agree to a deposit, you will need an approval for finance and to demonstrate that you have Funds to Complete in order to qualify for a Deposit Bond. Undrawn Credit Card funds will qualify as Funds to Complete.

So the Credit Card is the Clayton's Deposit.

Show that you can do it, but then not have to do it, is the name of the game.

Good luck, and hope you find an excellent IP#3 soon!

Cheers
Kristine


.

 

[Rolf Latham]

Hiya

A couple of funders will do 12 mths on comm depending on the business you are in

ta
rolf

 

[Cales405]

Hiya

A couple of funders will do 12 mths on comm depending on the business you are in

ta
rolf

Yes, I know. NAB has lent me plenty in the last 6 months. I had more troubles with the mortgage insurers than the lenders, due to doing 95%LVRs on investments and 90% LVR on PPOR.

My base salary wouldn't cover all my mortgages currently, as 3/4 of my income is comms. I am in sales (finance and insurance) in the motor industry and the motor industry has high turnover of staff.

Having two tax returns for 2 full years of comms will just give me more options and NAB would probably be willing to lend me more as all my accounts are with them and they can see how my accounts are conducted, but I think it is time to diversify anyway as I have 4 properties with them.

Hi Cales

This is all about planning.

If you can save the $10,000 in three months then buy with a 90 day settlement.

Use a Deposit Bond to fulfill the deposit requirement of the Contract.

Better still, negotiate a No Deposit contract. There is no legal requirement to pay a deposit. A deposit is, after all, simply a portion of the Purchase Price paid prior to settlement.

If you end up having to agree to a deposit, you will need an approval for finance and to demonstrate that you have Funds to Complete in order to qualify for a Deposit Bond. Undrawn Credit Card funds will qualify as Funds to Complete.

So the Credit Card is the Clayton's Deposit.

Show that you can do it, but then not have to do it, is the name of the game.

Good luck, and hope you find an excellent IP#3 soon!

Cheers
Kristine


.

Yes I thought of the longer settlement with lower deposit as an option, but wanted to use this as an option if the vendor wouldn't agree to a longer settlement. The deposit bond idea is a bit of hassle for two months and still will cost and put another enquiry on my CRA. I would prefer to do the cash advance over the deposit bond, although the cash advance would cost more, the availability is already there.

 

[grossreal]

hi
ask the vendor to do vendor finance back for 10k for 6 months at 8% with a registered second behind your first lender.
give personal quarentees and should be fine.
the other way
is do the same as above but they can hold a second signed but not registered second mortgage against one of the other ips.
and then they hand it back when you pay out the second on the new ip
one little bit of advice don't try to run before you can walk because thats when you slip.
no matter who tells you this is a good buy there is always another one thats just as good around the next corner

yes it is a good thing to move forward but you will find that some times you need to move sideways to move forward.
and I would in this market step on those stepping stone and make sure they are stones not leaves.
you need to secure, move, secure and move
securing a property is not that hard
vendor finance, options,delayed settlements, my favourite and it does work
but upsets real estates is to put down a 1 dollar exchange subject to finance get the finance and then delay a long as possible
as the lease value increase the longer I hold( for me).
just did one for 8 months and I hold the purchase with the 1 dollar.
so there are lots of ways to buy or control for very little money.
what you should look at is to option 12 months and then time your purchases.
but again remember holding or controlling is not the aim being solid is and buying with credit cards for me is not te way to go.
and by the way if your broker has not explained these ways to you my advice is to change brokers get a switch on one not a box ticker.
hope this helps

 

[Cales405]

hi
ask the vendor to do vendor finance back for 10k for 6 months at 8% with a registered second behind your first lender.
give personal quarentees and should be fine.
the other way
is do the same as above but they can hold a second signed but not registered second mortgage against one of the other ips.
and then they hand it back when you pay out the second on the new ip
one little bit of advice don't try to run before you can walk because thats when you slip.
no matter who tells you this is a good buy there is always another one thats just as good around the next corner

yes it is a good thing to move forward but you will find that some times you need to move sideways to move forward.
and I would in this market step on those stepping stone and make sure they are stones not leaves.
you need to secure, move, secure and move
securing a property is not that hard
vendor finance, options,delayed settlements, my favourite and it does work
but upsets real estates is to put down a 1 dollar exchange subject to finance get the finance and then delay a long as possible
as the lease value increase the longer I hold( for me).
just did one for 8 months and I hold the purchase with the 1 dollar.
so there are lots of ways to buy or control for very little money.
what you should look at is to option 12 months and then time your purchases.
but again remember holding or controlling is not the aim being solid is and buying with credit cards for me is not te way to go.
and by the way if your broker has not explained these ways to you my advice is to change brokers get a switch on one not a box ticker.
hope this helps

Thanks alot for your advice. My broker is unaware of my intentions at this stage. He is extremely good with advice, I just thought I would get a broader opinion. I have complete faith in his recommendations as he has advised me in the correct ways each time I have looked at purchasing or I have purchased. I went through speaking to about 5 different brokers before I decided to use the one I am (he is a property investor himself and often writes for API magazine and I do all my dealings interstate directly with him, although he has offices in Sydney where I live)

It seems to me that I will not put any deposit on my credit card and if the vendor will not provide a longer settlement, I will wait for a deal that comes along that will, or I will purchase 2 months later when I do have the deposit. I guess I am getting too eager and should be patient.

I read a lot here and also take on board what everyone here has to say, as my experience is very short term (bought my first IP in Nov 07 and the 3rd one will settle in less than two weeks)

 

[grossreal]

probably a good idea
I use lots of different brokers for lots of different deals and if you are happy with your thats the best you are going to get finance is more about the person then it is about money.
remember that ideas are what make money not the other way around.
and knowledge is the most important part so I hope you well