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Dec 10

Investment Loan choices should be well considered

Published in Untagged  by Vicky Edema |

Many borrowers entering the investment loan market are happy enough to run with their existing bank who invariably will recommend a simple 25 year investment loan on a principal and interest basis with a 5 year interest only term initially. As a general rule the bank will not look at restructuring your existing loan to ensure that your investment loan is the best suited for you not just from a flexibility point of view but also from a taxation perspective. It is more likely that they will not wish to disturb any existing home loan you may hold fwith your bank for fear that you may consider a refinance and they lose you as a customer..

 

The fact is the banks are doing a disservice to you if this is their approach. The reality is that when you are looking for an investment loan you must consider your other borrowings because if you properly structure your investment loan with any existing home loan debt then there are benefits for you.

 

In the past borrowers have simply accepted that they need to draw on their personal income to subsidise the shortfall that occurs on a negatively geared investment (i.e. the rental income from the property does not cover the interest payments on the investment loan and other outgoings (rates, maintenance etc) incurred by the investor. It is also fair to say that in the past, loan structures have been simplistic stand alone facilities.

 

Today you are able to structure your total portfolio so that within the one mortgage you have various loan accounts each of which are flexible and offer opportunities to minimise your tax. The multiple loan accounts are necessary within your portfolio because:

1.      your home and investment loans are not mixed (the ATO views mixed loan accounts dimly and will require that any principal repayment into a mixed home and investment loan facility be apportioned between the 2 accounts. You are not able to apply the total amount to reduce your non-deductible home loan debt first – a much more tax efficient option.

2.      The cost benefit you will enjoy with the multiple accounts in that for accounting purposes income and expenses for each investment property are easily identified. Saves you in accounting fees!

3.      you can include a capitalising line of credit as one of your accounts if you have built up equity in your home property. It is advantageous to put an investment line of credit loan into the mix because this not only provides you with a safety net to cover off any vacancy factor on the investment property (which might put a strain on your cash flow) but also and more importantly it allows you to draw on the line of credit to meet any shortfall in the interest payments on the investment loan or other maintenance costs associated with the investment property. By utilising the line of credit to service any shortfall in interest you receive a two-fold benefit: 

            (i) you can use more of your personal income to reduce your home loan non-          deductible debt – instead of subsidising the cost of the interest on your            investment loan.

             (ii) by borrowing to meet the interest rate shortfall you increase the amount of        deductible interest you can claim under your investment loan borrowings.
Feb 02

Why Use a Mortgage Broker

Published in mortgage brokerhome financefirst home buyer by Vicky Edema |
The main reason people go to mortgage brokers is to get access to a greater range of mortgage options, for better service and for the mortgage broker's ability to negotiate with lenders. A mortgage broker offers loans from a panel of financial institutions, including banks and non-banks. Using a mortgage broker is now an essential part of scouring the market for the right home loan. In simple
Feb 02

Use a mortgage broker to save time and money

Published in mortgage brokerhome financefirst home buyer by Vicky Edema |
Usually clients are busy people who don't want to spend their precious time searching for the best mortgage deal but still want the best deals available. They do need a qualified professional such as a mortgage broker they can trust to review the market and to look in detail at their circumstances. A mortgage broker can and provide them with full mortgage information, the most competitive and
Feb 02

Mortgage broker the way to go in Australia

Published in mortgage brokerhome financefirst home buyer by Vicky Edema |
If you are in the market for a home loan then your best course of action is to obtain assistance from an experienced mortgage broker who is also accredited with the national industry body, the Mortgage Finance Association of Australia (MFAA). By dealing with a mortgage broker who is a member of the MFAA you are not only assured of the knowledge, experience and training of the mortgage broker but
Feb 02

Mortgage Brokers in Australia will save you time and money

Published in mortgage brokerhome financefirst home buyer by Vicky Edema |
A mortgage broker offers loan products of various lenders. Essentially, a mortgage broker is a loan provider who serves as a contact between borrowers and lenders. A mortgage broker will learn the needs of the borrower and start researching the market for the best loan deal from lenders offering that particular type of mortgage loan. Mortgage brokers usually work with numerous lenders,
Feb 02

3 Fears Of The First Home Buyer in Australia

Published in mortgage brokerhome financefirst home buyer by Vicky Edema |
One of the biggest fears of first home buyers everywhere, is that they may never get on to the property ladder at all. This is a real social stigma in Australia where 70% of people own, or are buying their own homes.

The Federal Government’s ‘First Home Owner’ grant that was increased in October 2008 has encouraged a flood of calls to mortgage brokers. Young hopefuls are looking to take
Feb 02

First Home Buyers back in the market in Australia

Published in mortgage brokerhome financefirst home buyer by Vicky Edema |
First Home Buyers back in the market in Australia All the signals are right if you are a first home buyer living in Australia. At no previous time has a first home buyer had access to a number of cash subsidies and savings that have resulted firstly from individual state government initiatives and secondly from initiative by the Federal Government to encourage first home buyers back into the
Feb 02

Fabulous News For First Home Buyers

Published in mortgage brokerhome financefirst home buyer by Vicky Edema |
What fabulous news for first home buyers, a whopping $21,000 towards deposit, expenses or even new furniture if you buy a brand new home before June 2009. So if you’re ready to take the plunge and sign up for what is likely to be the biggest commitment you’ve ever made, now, more than ever, seems to be the perfect time to get into the property market as a first home buyer. Even though your
Nov 30

The benefits of using a mortgage broker

Published in new car financemortgage brokerhome finance by Vicky Edema |
There has been press recently concerning the benefits of using a mortgage broker when looking for home finance and car finance – yes, a mortgage broker will generally be able to assist you with your car finance as well as standard home finance and investment loans.

The mortgage broker business boomed during the 1990s when there was a plethora of home finance and car finance loan products
Nov 30

Where are home finance interest rates heading?

Published in new car financemortgage brokerhome finance by Vicky Edema |
The good news is that home finance interest rates are heading south! The Reserve bank of Australia like other banks around the world has been effectively reducing the cost of home finance by cutting the Official Cash Rate over the past few months. Australia saw a drop of 1% in the cash rate in October and then another 0.75% in November and the likelihood is that the RBA will pass on a further
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