LOC schemes - can anyone advise me?



From: Mal McPherson

Hi everyone

I'm new here so forgive me if this subject is old hat but I really would like some advise in this area.

For the past few years I've been working to get some more equity in my home so that I can look at an IP. Just recently I went to a seminar held by money power planners. These guys claim to be individual companies working together under one umbrella (agents/accountants/financiers/developers) to introduce people to the IP idea.

Obviously this help comes at a price but they claim to be no different than if you sought the expertise of other professionals by yourself.

Their idea is to refinance your existing home loan & the IP as a line of credit & use a credit card. Fair enough! The process involves paying only the interest on the IP LOC until your own home is paid off and then you look at moving on from there. They only want to deal in new properties (with their developers) because you can depreciate more and there would be less maintenance ect. ect.

My question to anyone who can help me is does this type of scheme have any drawbacks? Are these people scammers? Is their a cheaper/better way to do what their saying?

I would really appreciate any advise.

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Reply: 1
From: Sergey Golovin


You probably can do bit of research by your self and do all those tricks on your own and do not pay any commissions.

But then again you have to find out whatever is easier for you.

At the end of day you are the one who pays for it.

All the best


Have look section Property Investor Archive (the very last one on the list) on very same forum.
Mike has done excellent job there putting together all the information on how to get started.
I think it would be good idea to have look at it.

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Reply: 2
From: Rolf Latham

Hi Mal

Old Hat - never, always a fair question.

The organisation you have mentioned may be great. A lot of us would have these suggestions for you.

Do your homework

1. Use a good independent mortgage broker that will do the structure and paper chase work probably for no cost to you. If the seminar co offer the service for free ask for justification and comparative information on other products in the market

2. My personal suggestion as a broker is that mortgage reduction systems work extremely well, but it pays to do the numbers without an inflation component in the figures. Also, these types of systems are not suited to people with poor savings habits or those without significant disposable incomes. Quite commonly, those types of people will do better with a garden variety loan without offset or LOC facilities. They would pay for features they do not use.

3. If they are financial planners then the Financial Planning Association of Australia can help you to id whether they are members.

4. Get YOUR own valuation done on any property in consideration.

5. Ensure that the loan are set up as separate securities and not tied to each other.

In closing, there are always cheaper ways to do things, one stop shops are common and do work for many people that are time poor.

The major drawback is that having everyone under the "one roof" makes it hard to get an objective (ie external of the deal) opinion on anything.

Having said all that many of my clients have used these types of services and have come out ok. just comes down to doing your home work and trusting your intuition and talking to some existing clients that have used the service.


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Reply: 2.1
From: Mal McPherson

Thanks so much for the unbiased opinions and suggestions. I will certainly take everything on board.

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Reply: 1.1
From: Mal McPherson

Thanks very much Serge, will do.

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