Requested LOC got STD redraw account

[cceasy]

Hi all,

I posted a thread 3 weeks about about issues with cross collaterisation

http://somersoft.com/forums/showthread.php?p=1277328

Well I requested the cross be removed and LOC setup. Well I thought all was well but settlement occurred today and turns out I do not have LOC setup. I spoke with Suncorp and they said no LOC is setup... Just standard loan account. They suggested I speak to my broker...

Well I did and he said that it's like no it's not LOC, it's similar... IT's a standard loan account with withdraw linked to offset.

What does this mean for for me tax wise? I only plan on using the funds for investment. Can this be resolved? I feel so frustrated!

 

[Jamie M]

Hiya

Sounds fine. Setting up a standard interest only variable loan with a redraw is often better than a LOC.

Just place the available funds back into the equity release loan - and redraw ONLY for investment purposes as needed.

Normally it's cheaper too (LOC's generally cost an extra 15 points or so) - having said that, I'm pretty sure that the variable and LOC are the same rate with suncorp.

Cheers

Jamie

 

[Peter_Tersteeg]

The Suncorp standard loan will almost certainly do what you want and is significantly cheaper. You can certainly make debits for deposits directly from the loan account (which is the main reason some people are advocating LOCs instead). I'd probably make the same recommendation, although utlimately it is your choice.

If you really want the LOC, it shouldn't be too difficult to get your broker to switch it over. It's probably not necessary though.

 

[cceasy]

Thanks guys... I was just worried about not having the right structure.

Makes sense and I can sleep easy.

 

[Peter_Tersteeg]

Your concern is about product. Structure is a different problem.

 

[cceasy]

haha I meant product so that I have the right structure... i think... all new to me... still learning so ignore my ignorance...

 

[albanga]

Hey Jamie,
Why did you advise for the equity funds to be placed back into the loan and redrawn as opposed to just left in the offset attached to that loan?

I would have thought given they are already borrowed funds and so long as they are used for investment only then the full deductibility would still apply.

 

[Brady]

Albanga because fair chance of extra funds going into the offset, therefor having mixed funds. How do you the. Determine what funds have been used. If it's separate new offset account with no other use and no funds in/out no mix I'm happy.

 

[albanga]

Albanga because fair chance of extra funds going into the offset, therefor having mixed funds. How do you the. Determine what funds have been used. If it's separate new offset account with no other use and no funds in/out no mix I'm happy.

Hey Brady,
I understand the principal but if it is paid into the NEW offset for the NEW loan then there should not be any difference (except for the fact it is easier to mix it with non deductible debt if it comes with an ATM card).

 

[Brady]

Agreed. I'm happy with that way. Long as don't mix

 

[Terry_w]

I am not happy

By parking in the offset you are breaking the direct connection with the borrowing. The longer it is in the offset the weaker the connection is.

I suggest you get a PBR to make sure if you are going down this track.