Whats peoples thoughts on the following???????? A mortgage broker has sent this to me.
Positive Cash Mortgage Turning your current equity into positive Cash Flow.
What’s Positive Cash Mortgage?
The Positive Cash Mortgage (PCM) is an innovative mortgage product that delivers positive cash flow from negatively geared investment from day one.
Traditionally, property investors have to endure cash flow shortages for many years until the rental yields from the investment property eventually catch up with the interest repayments.
As such, many investors end up having good assets but poor cash flow and lifestyles suffer.
PCM turn this around completely where investors can now convert some of their future equity into positive cash flow.
What are the benefits?
Investment opportunities – investors low on cash flow are able to invest without making drastic changes to their current lifestyles.
Positive Cash Flow – investment property cause positive cash flow (loan repayments from rent) rather then negative (investors topping up shortfall of repayment after tax refund).
Improved Cash Flow – investors need to pay only a portion of the interest rates in the first five years where repayment is lower then their current rental yields.
Maximise Leverage – helps investors to afford and enjoy more homes with lower monthly repayments.
Dynamic LVR – depending on what happens to value of property over the 5 year period, the LVR of mortgage may end up from 55% to 90%.
Flexibility and control – money saved (not paid in) can be re – invested or paid into principal balance or into a rapid mortgage reduction package.
Greater Saving – PCM can be coupled with our Fully Transactional Loan (FTL) to further reduce the home loan and allow investors to pay the latter off earlier.
How does it Work?
In general, PCM is a 30 year investment mortgage with various options such as Fixed or Variable Rate, Interest Only or P& I, Full Doc or Lo Doc or No Doc and Fixed or Capped Interest Rate.
The key to PCM is that investors need to pay only a portion of the loan interest for the first 5 years of the loan, which is considerably the most difficult period for many.
The unpaid interest repayment will then be added to the mortgage balance capitalised to be paid in future years.
This allows investors to make repayments that are lower than their current rental yields for the initial years of the loan with the unpaid interest delayed into later years.
By the end of 5 years, the rental increases would have caught up and be sufficient to cover the gradual interest repayment increases.
Now, investors can have positive cash flow and retain a high growth investment property.
How much can you borrow?
Generally, you’ll be able to borrow up to 90/95% of the value of your property but 10% will be utilised as the reserve for interest differential capitalisation.
Full Doc, Lo Doc, No Doc and Non – Residents options are available as well.
What are the interest rates?
The indicative interest rate for the first year is 7.69%. It will then decrease to 7.59% for subsequent years of the loan with an annual advance professional packaging fee of $330.00.
However, investors only need to pay a portion of these rates in the first 5 years of the loan.
In the first year, investors need to pay 50% of 7.69%; in the second year, 60% of 7.59%; in the third year, 70% if 7.59%; in the fourth year, 80% if 7.59%; and in the fifth year, 90% of 7.59%
From the sixth year onwards, investors pay 100% of the interest rate.
Comparison of Positive Cash Mortgage and Standard Mortgage
Avg Mthly Diff# Avg Annual Diff#
Year Interest Rate Loan Balance Interest Repayment LVR Loan Balance Interest @7.65%
Settlement $400,000.00 80% $400,000.00
End Yr 1 7.69% (50%) $415,654.00 $15,654 83% $400,000.00 $30,600 $1,246.00 $14,952.00
End Yr 2 7.59% (60%) $428,450.00 $19,194 86% $400,000.00 $30,600 $950.00 $11,400.00
End Yr 3 7.59% (70%) $438,309.00 $23,003 88% $400,000.00 $30,600 $633.00 $7,596.00
End Yr 4 7.59% (80%) $445,009 $26,800.00 89% $400,000.00 $30,600 $317.00 $3,804.00
End Yr 5 7.59% (90%) $448,398 $30,504 90% $400,000.00 $30,600 $8.00 $96.00
Positive Cash Mortgage Turning your current equity into positive Cash Flow.
What’s Positive Cash Mortgage?
The Positive Cash Mortgage (PCM) is an innovative mortgage product that delivers positive cash flow from negatively geared investment from day one.
Traditionally, property investors have to endure cash flow shortages for many years until the rental yields from the investment property eventually catch up with the interest repayments.
As such, many investors end up having good assets but poor cash flow and lifestyles suffer.
PCM turn this around completely where investors can now convert some of their future equity into positive cash flow.
What are the benefits?
Investment opportunities – investors low on cash flow are able to invest without making drastic changes to their current lifestyles.
Positive Cash Flow – investment property cause positive cash flow (loan repayments from rent) rather then negative (investors topping up shortfall of repayment after tax refund).
Improved Cash Flow – investors need to pay only a portion of the interest rates in the first five years where repayment is lower then their current rental yields.
Maximise Leverage – helps investors to afford and enjoy more homes with lower monthly repayments.
Dynamic LVR – depending on what happens to value of property over the 5 year period, the LVR of mortgage may end up from 55% to 90%.
Flexibility and control – money saved (not paid in) can be re – invested or paid into principal balance or into a rapid mortgage reduction package.
Greater Saving – PCM can be coupled with our Fully Transactional Loan (FTL) to further reduce the home loan and allow investors to pay the latter off earlier.
How does it Work?
In general, PCM is a 30 year investment mortgage with various options such as Fixed or Variable Rate, Interest Only or P& I, Full Doc or Lo Doc or No Doc and Fixed or Capped Interest Rate.
The key to PCM is that investors need to pay only a portion of the loan interest for the first 5 years of the loan, which is considerably the most difficult period for many.
The unpaid interest repayment will then be added to the mortgage balance capitalised to be paid in future years.
This allows investors to make repayments that are lower than their current rental yields for the initial years of the loan with the unpaid interest delayed into later years.
By the end of 5 years, the rental increases would have caught up and be sufficient to cover the gradual interest repayment increases.
Now, investors can have positive cash flow and retain a high growth investment property.
How much can you borrow?
Generally, you’ll be able to borrow up to 90/95% of the value of your property but 10% will be utilised as the reserve for interest differential capitalisation.
Full Doc, Lo Doc, No Doc and Non – Residents options are available as well.
What are the interest rates?
The indicative interest rate for the first year is 7.69%. It will then decrease to 7.59% for subsequent years of the loan with an annual advance professional packaging fee of $330.00.
However, investors only need to pay a portion of these rates in the first 5 years of the loan.
In the first year, investors need to pay 50% of 7.69%; in the second year, 60% of 7.59%; in the third year, 70% if 7.59%; in the fourth year, 80% if 7.59%; and in the fifth year, 90% of 7.59%
From the sixth year onwards, investors pay 100% of the interest rate.
Comparison of Positive Cash Mortgage and Standard Mortgage
Avg Mthly Diff# Avg Annual Diff#
Year Interest Rate Loan Balance Interest Repayment LVR Loan Balance Interest @7.65%
Settlement $400,000.00 80% $400,000.00
End Yr 1 7.69% (50%) $415,654.00 $15,654 83% $400,000.00 $30,600 $1,246.00 $14,952.00
End Yr 2 7.59% (60%) $428,450.00 $19,194 86% $400,000.00 $30,600 $950.00 $11,400.00
End Yr 3 7.59% (70%) $438,309.00 $23,003 88% $400,000.00 $30,600 $633.00 $7,596.00
End Yr 4 7.59% (80%) $445,009 $26,800.00 89% $400,000.00 $30,600 $317.00 $3,804.00
End Yr 5 7.59% (90%) $448,398 $30,504 90% $400,000.00 $30,600 $8.00 $96.00
