More on offset/LOCs



From: Anonymous


With all the 'talk' about LOC and offset accounts going on, I'd like to run my situation by the good people on the forum. (I also want to thank you everyone-With your help I will retiring years earlier!)

I have a PPOR valued at $450,000 with a loan of $80,000.
Investment Property 1, Valued at $220,000 with a loan of $207,000. The loans are cross collateralised.

I want to buy many more properties, and my mortgage broker advised the following:

Refinance to un-cross collateralise the loans. Get a PPOR loan of $80,000 with a 100% offset account linked.
Set up a LOC for 80% of the value of this house, minus the value of the loan I have with it. ie LOC of $280,000.

Get the investment property 1 loan at 80% of $220,000 and use a bit of money (about $31,000) from the LOC to keep the LVR below 80% to avoid LMI.

I should then have a LOC for about $250,000 left. I can then put down 20% deposits on each investment property that I buy, and pay no more LMI!

This should enable me to buy about 3 more $300,000 properties.

So I will have a ppor and 4 investment properties!!

I then put all of the rent, salary and other money into the offset and any business/property expense I take out of the LOC, and then pay only the interest on this untill my home loan is fully paid off- which won't be long!

I also understand that I could get a cash bond with the money in the LOC to help with increasing my serviceability, but I think 3 more properties at this stage is enough.

What I would like to ask is does this strategy sound right? This is my understanding on it. can I improve it in any way??

Thank you very much for all of your help.



ps I am doing this annon as these are my real personal details and I don't want anyone to know that they are 'mine'
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Reply: 1
From: Rolf Latham

Hi Anon

Looks ok from a structure point of view, obviously being set up with Westpac Rcoket and Rocket Equity Loans.


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Reply: 1.1
From: Fiona H

Definitely un-cross collateralise...

My only bug-bear with LOC's is that you MUST monitor your expenditure and budgets to ensure that you do get ahead.

I have met people who were told to get an LOC and put all their income in it, pay everything by VISA, then pay the VISA once a month. Sounds great in principle, BUT, they didnt monitor it, their spending went through the roof and one year later they are behind where they started!

If you are disciplined enough to do this on a weekly/monthly basis, great.

Me, I'm too lazy (although I have a fab. budget and stash bill money in different accounts too).... I prefer a regular bank account, and redraw facilities on our loans and just make extra lump sum payments as and when the money is available. I know I can redraw it if I need it for emergencies, IP's that sort of stuff.

Good luck,
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