Recommendations for learning about financing options

Discussion in 'Property Finance' started by Tietgen, 25th Mar, 2015.

  1. Tietgen

    Tietgen Member

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    Hi Guys,

    First post and new to everything here so not sure if there is already an existing thread somewhere...but basically I'm trying to get a handle on the financing options that exist, the role of offset accounts, LVI, LMI and all these abbreviations etc. and piece together the pros and cons just to get a better handle on this aspect of property investment.

    So are there any books, online resources, courses, existing threads etc? that give a good, simple explanation of how financing works in Australia?

    Thanks a lot guys!!!
     
  2. bonanzawealth

    bonanzawealth Member

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    read multiple posts in Somersoft forum. Not only you learn the abbreviations but also the technique.

    Still not confident? Chat with the brokers available in this forum. Most of them are great source of knowledge :D
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

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    You really don't need a course to learn that stuff, it's all here!

    In a nutshell -

    Offset accounts = the balance in your offset account 'offsets' the balance in your loan. For eg - $100k loan, $20k in offset means interest is only charged on $80k, ($100k - $20k) not $100k. The $20k works as though it's paid off the loan, even though it isn't. Very handy for nearly everyone.

    LVR = the amount of debt you have in relation to the value of the property.

    ie, if the house is worth $100k, you owe $80k, you have 80% LVR.

    LMI = if your LVR is higher than 80%, in most cases you'll need to pay Lenders Mortgage Insurance. It insures the bank, not you, in the event you default.

    Pro's and cons are very situation specific and are best discovered through a consultation with a broker (and won't cost you anything.)
     
  4. Tietgen

    Tietgen Member

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    Okay cheers I'll give it a go!
     
  5. Tietgen

    Tietgen Member

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    Okay just so I've understood your example regarding the offset account, do you mean that if you had $20k in the offset account you won't have access to it? because if you say interest is charged only on the $80k, then why not just have the whole $100k loan in the offset account? I'm guessing banks aren't so willing to do that? or is there something I'm missing?

    Thanks for the reply!
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

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    The $20k in the offset is not part of the loan, it's your savings.

    Just say the house is valued at $120k, you have a loan of $100k (which was used to pay for the house) and that is how much you owe the bank. With nothing in the offset, you pay interest on $100k. But if you put your $20k savings in the offset account, you only pay interest on $80k.

    You can use the offset like a normal transaction account and money is (usually) easily accessible through the ATM.

    Does that make sense? basically, the money in the offset is yours to do with as you wish, and every cent in it reduces the interest you pay.
     
  7. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

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    Jess' reply to this covers it, but I think your understanding of finance is way off. As suggested, keep reading the forums, but it would also be good to sit down with Jess (you're both in Perth), buy her a coffee and discuss how loans are structured and what might work for what you want to do.
     
  8. Tietgen

    Tietgen Member

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    Yeah, thanks for the idea. I definitely think i jumped the gun too soon by posting, will invest a lot of time reading through this forum first to get a better basic understanding.

    Cheers!
     
  9. Tietgen

    Tietgen Member

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    Yeah that makes sense, thought about it a bit more too! thanks for being so patient!

    Cheers
     
  10. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

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    You didn't jump the gun, it's all good - asking questions is the best way to learn. If the forum is daunting (and many of the posts are quite advanced) don't feel shy asking. We were all new once :)
     
  11. Redom

    Redom Mortgage Broker

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    Stick around on the forums and you'll be a guru in no time. Some of the posters here that aren't brokers know more than most i've met in the industry (DT!).

    If you want answers to specific questions, you can dig through some of the older finance threads. Plenty of info there. If you're thinking it, chances are someone has before you too. :)

    Cheers,
    Redom