LOC yes or no

[Harry75]

Hi all,

i need advice on loan structure, i have been reading lomas books of late and was thinking loc was the way to go, but after reading posts on this forum there seems to be some debate on the subject and has caused me to reconcider.

i am currently with anz on a low doc break free package, with three loans
ppor, ip, and small business loan total lvr of aboute 60-65%.

i would like to do a dual occ on ip to build quick equity and then invest again asap and get the machine moving forward.

any advice given would be appreciated.

 

[craigb]

money is money if you think you ned it , but the duel accy idea is a tough and not so romantic as it seems , so do your home work, believe me! dot all your i's and cross all your T's,
good luck

 

[Pablo]

Harry,

If you mean doing a renovation to convert current IP in 2 then I would use a LOC to fund the work and then see about refinancing it to get the loan stand alone. But beware as having a property dual oc does not add much in the way of capital value, I have one and its only been valued at an extra $15k above the neighbouring property on the same size block and mines a nicer house. Dual oc is more a cashflow thing rather than capital.

 

[Rolf Latham]

Hiya

An ANZ standard loan with 10 years IO and a 100 % offset account can do most things that a LOC can

ta
rolf

 

[Propertunity]

... but the dual occy idea is a tough and not so romantic as it seems , so do your home work, believe me! dot all your i's and cross all your T's,

Yes, agree totally. All the profits can easily slip away and you can come out with $zero profit or a slight loss just as easily as making $70K or so.

 

[Harry75]

Harry,

If you mean doing a renovation to convert current IP in 2 then I would use a LOC to fund the work and then see about refinancing it to get the loan stand alone. But beware as having a property dual oc does not add much in the way of capital value, I have one and its only been valued at an extra $15k above the neighbouring property on the same size block and mines a nicer house. Dual oc is more a cashflow thing rather than capital.

Pablo,

Ip is on corner block with original house in perfect spot to allow stand alone house, so
1, does this improve values
2, will it devalue original house due to smaller land content if it is eventually sub divided as council has told me can be done.
3, was planing on holding both so no need to sub divide is this true or will this effect valuations for future equity

 

[Pablo]

If your building another in the back yard of a corner block thats a totally different story.

Yes the front property will be slightly devalued as you you are splitting the block but you can often get most of that back by doing a cheap reno.

I would sub divide them if I was you as it will increase the values and make it easier to sell if your circumstances change in the future.

All up you can't really go wrong so go for it.

 

[the7]

Hiya

An ANZ standard loan with 10 years IO and a 100 % offset account can do most things that a LOC can

ta
rolf

Hi Rolf,

how would you use this type of loan if you wanted to use it (as you would a LOC) to pay for IP expenses, deposit for a new purchase, interest repayments etc. how would you draw on it as you need it?

 

[Rolf Latham]

Hiya

When the loan draws, you tip all the funds into the attached offset.

You can transact out of that account, and provided u use this for investment use only, the interest can be allocated to investment use

ta
rolf

 

[the7]

Hey Rolf, I have loans with the CBA (economiser) at the moment and would prefer not to refinance to another lender unless absolutely necessary. If I set up a loan against our PPOR with the wealth package (mainly to get the good rate and MISA) this would be similar to the ANZ example you mentioned. Would it would it end up too much hassle as the MISA is not fully transactional? I have a debit MasterCard that I use for IP expenses only so I could transfer the money from the MISA there for transactions less than $500 and leave the balance there for the next transaction.

 

[Rolf Latham]

Hiya 7

The same structure I described can work with the CBA SVR and MISA.

The non transactional part of the MISA doesnt worry many. I personally have one and find it a pain to work with properly, but then Im a set and forget person.


ta
rolf