Who's doing debt recycling?

Discussion in 'Share Investing Strategies, Theories & Education' started by money_penny, 20th Jun, 2017.

Join Australia's most dynamic and respected property investment community
  1. Corey Batt

    Corey Batt Well-Known Member

    Joined:
    14th Jun, 2015
    Posts:
    2,091
    Location:
    Adelaide, SA
    There's a temporary block on the facility at the moment. AMP is trying to keep under the interest only caps dictated by the regulator so they've had to put restrictions on what interest only/LOC lending they're providing at this time.

    I'll let anyone who wants to know when this facility is back as we will be updated immediately as we have quite a few applications waiting on it's return - send me an email to [email protected] and I can put you on the list of people to let know when it's back up and running.
     
  2. money_penny

    money_penny Member

    Joined:
    18th Jun, 2017
    Posts:
    10
    Location:
    Australia
    Nooo not my cunning plan!! Well, no not really.

    @Corey Batt - Has there been any news on how long AMP will do this for, and are other lenders doing the same?
     
  3. money_penny

    money_penny Member

    Joined:
    18th Jun, 2017
    Posts:
    10
    Location:
    Australia
    Here's another question - what happens to debt recycling if you avoid buying shares in a boom market? e.g If the shares you want are relatively expensive so you hold off buying for months? Do LOC products charge a fee if there's no minimum spend per year? Do you try to look for undervalued shares or do you keep saving to increase your war chest?
     
  4. Corey Batt

    Corey Batt Well-Known Member

    Joined:
    14th Jun, 2015
    Posts:
    2,091
    Location:
    Adelaide, SA
    No date announced - they will generally not announce it's return until it's back - no notice.

    As per lenders doing the same - they all are to some degree and at different times. Some have had to completely stop lending to investors, others reducing LVR's or increasing rates well above the norm. The key is just that all lenders are having to meet the same regulatory caps, so if they grow their portfolios out of line of the maximum amounts they have to put the handbrakes until they get under the growth limits.

    As per not using the account - no the fees are the same whether used or not. Good luck trying to work out when to buy shares at the top or bottom of the market - you never know when the latest top is the next bottom of the market.
     
  5. #Novice

    #Novice Member

    Joined:
    25th Aug, 2017
    Posts:
    6
    Location:
    VIC
    @Corey Batt would using the LOC for a fixed interest product be worth looking into or would it only be beneficial for shares/property for the debt recycling strategy?
     
  6. Corey Batt

    Corey Batt Well-Known Member

    Joined:
    14th Jun, 2015
    Posts:
    2,091
    Location:
    Adelaide, SA
    Not enough info to comment (and I don't comment on specific advice re; what is better/worth it as an asset class). Best to weigh up with your financial adviser the returns/potential of the fixed interest product vs alternatives.

    Being a fixed interest product which would likely be above the rate of interest being charged, this is likely for onlending via unsecured/credit impairment/credit alternative products which carry a different risk profile than say a term deposit. Be careful in correctly assessing the risk of what you're investing in!
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,568
    Location:
    Australia wide
    Could you find a fixed interest product that returns more than you pay on the LOC?
     
  8. #Novice

    #Novice Member

    Joined:
    25th Aug, 2017
    Posts:
    6
    Location:
    VIC
    For example if you were to use Latrobe Financial's Select Investment options where you can get fixed interest rates of ~7%, would that be worth looking into? Again I'm not sure what the LOC rates are currently. (assume I decide the risks involved are within tolerance level) or is it preferable using an investment vehicle like property/shares with the potential capital gain associated with the asset?
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,568
    Location:
    Australia wide
    I won't give you financial advice buy just say the ideal from a tax point of view would be to borrow with a loc and then convert it to a term loan.

    Keep in mind the risks of losing your money.
     
    2 people like this.
  10. #Novice

    #Novice Member

    Joined:
    25th Aug, 2017
    Posts:
    6
    Location:
    VIC
    Yup, thanks for your thoughts.