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Loan recommendations?

Discussion in 'Finance & Banking' started by MiddleClassMonkey, 6th Aug, 2007.

  1. MiddleClassMonkey

    MiddleClassMonkey Well-Known Member

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    Anyone have experience on LoanAustralia? The product I was looking at was the LOC loan: Line of Credit Loan

    LOC up to 90%, 7.14%pa, 100% offset available, no account keeping fees etc. All the features are there, with the lowest rate around and low fees (aside from a deferred establishment fee if bailing out early)

    Or can anyone else make recommendations? The features I'm looking for are:
    - LOC facility
    - Interest only
    - 100% offset account
    - Low rate / ongoing fees


    - MiddleClassMonkey
     
  2. MiddleClassMonkey

    MiddleClassMonkey Well-Known Member

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    I am now very confused. After speaking with LoanAustralia staff it appears that they don't offer 100% offset accounts (even though their website states it). The customer service rep (who was very friendly) said it's basically a redraw facility but works just like an offset account would. The "line of credit" is also just taking out additional money, and isn't split from the normal interest payments on your statement. You only have one account and statement does not break up any components.

    I actually rang again to speak with someone else, this time they weren't so friendly. But the response was more or less the same.

    Is there such as thing as a loan that has offset IO and LOC all in one? Or is it one or the other (offset account or LOC)?

    Just when I thought I had a grasp on things everything falls through my fingers
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    That is very bad form on their part ... I wouldn't expect them to care (or even be aware) of the differences from a tax point of view - they are not advisors ... but I would expect them to call a product what it is. An offset account is completely different from a redraw facility in how it works, regardless of what your intention is from a tax point of view :mad:

    Do you have a good mortgage broker ? They should be able to help you find a suitable loan at a good rate.
     
  4. Simon

    Simon Well-Known Member

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    This may be a generalisation but I think you might get more accurate advice from a Mortgage Broker as opposed to a Call Centre Operator.

    I can recommend some good ones if you need a referral.

    Cheers,
     
  5. MiddleClassMonkey

    MiddleClassMonkey Well-Known Member

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    I tried two brokers, one of whom did nothing and the other recommended a loan with CBA. Unfortunately, he did nothing that the bank wasn't openly offering anyway and I was hoping he could negotiate a better rate with them.

    Simon, could you PM me some brokers in Sydney?

    Thx
     
  6. Sk3tChY

    Sk3tChY Well-Known Member

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    Sorry to get a little off topic, but I was under the impression a LOC was just like an oversized credit card. And basically you just pay of what you like as you go etc, and would have access to all your funds via your bank card.

    What are the advantages of an offset account?

    A little back on topic Ratebusters - Mortgage of the Year 2005, 2006 & 2007! im not sure how they are now, but I think they had some good rates a while back, as low as 6.99% if i recall correctly.

    Otherwise try RateCity - The online comparison capital - Home maybe you'll find something on there.

    Sorry if im stating the obvious here, heh. Alternatively, ask Simon, or Sim... they know all. :p
     
  7. MiddleClassMonkey

    MiddleClassMonkey Well-Known Member

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    Sk3tChY, those are great websites. I'll call them tomorrow and ask about the details.

    I'm starting to think perhaps I am misunderstanding something. Is it even possible to have IO + LOC + 100% offset in one loan? Or do you get a IO + offset then get LOC as a separate loan altogether??
     
  8. voigtstr

    voigtstr Well-Known Member

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    Simon will help you if you ask nicely :)

    Actually Simon, heres a question:
    If my house loan is with one loan providor, can you get a LOC against the equity with another providor, and still transfer the equity from the home loan to the LOC easily (perhaps yearly valuations?)
     
  9. Sk3tChY

    Sk3tChY Well-Known Member

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    Glad to hear I could be of some assistance. :)

    And someone will correct me if im wrong, but as I said before, I always thought a LOC was basically a giant credit card. I don't think theres IO or offset options with LOC's.

    I think they just work like credit cards, each month you need to pay the interest amount and thats it. You normally have your salary/salaries credited to the LOC account, and thats what knocks off the principal.

    And they dont have an offset facility, rather a 'redraw' one, because you basically are given a card for the account and can redraw whatever, whenever you want, provided you dont go over your 'credit limit'.

    To put things as simple as possible LOC = Giant Credit Card.

    Someone of course will corect me if im wrong.

    ps: If you could let me know which lender you opt for when you finally go thru with this, could you let me know the top lender you found. I'll be looking into property hopefuly mid 2008.

    pps: I looked over your original link for loan australia. You'll note it merely says '100% offset'. It dosen't mention anything about an offset 'account'. By 100% offset they mean, any additional payments you make to the fund 100% offsets your interest.
     
  10. MiddleClassMonkey

    MiddleClassMonkey Well-Known Member

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    OK so it's correct to say that LOC is a separate feature that you add to an existing loan?

    eg: I get a loan that is IO and has a 100% offset account. Then I add a LOC loan on top of that? Or does the LOC replace the original "IO + 100% offset account loan"?

    Can the IO+offset loan be from one provider and LOC from another?

    Sk3tChY, I didn't realise there was a difference between '100% offset' and '100% offset account' but I see your point. Still, I consider it misleading.
     
    Last edited by a moderator: 15th Aug, 2007
  11. Sk3tChY

    Sk3tChY Well-Known Member

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    LOC isn't a feature, its a type of loan.

    In your example, the LOC would replace the loan.

    And yes you can have 1 IO+offset loan from one provider and an LOC from another.

    Without meaning to confuse you, essentially an IO+Offset loan is basically the same as a LOC, you can pretty much do the same things with both. So in my opinion if you had to choose between the two, I'd opt for the one that has the cheaper rates.

    Sim or Simon would really be the best people to speak to about this, especially Simon, he's a mortgage broker.
     
  12. MiddleClassMonkey

    MiddleClassMonkey Well-Known Member

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    OK this is my situation

    I have a PPOR that I may rent out in the next 5 years. In the meantime however, I have a P&I mortgage with no offset account. I also have some capital that I am looking to invest in shares/MFs.

    I've been thinking that investing the capital directly into shares/MFs would be silly as I have my PPOR mortgage being a non-tax-deductible loan.

    So, it makes sense to place capital into an offset account then draw out the same amount for investment purposes (via LOC best?)

    Also, considering I may change my PPOR to rental property, it also makes sense not to reduce my principle.

    So, if I were to re-finance, I'm looking for IO + offset account. But I also need the ability to draw equity out for investment (only) purposes.

    What's the best loan structure for me? (in layman's terms!)

    Many thanks in advance
     
  13. Simon

    Simon Well-Known Member

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    Draw whatever you need via a LOC or a simple split - as long as investment loan is detailed seperate to the PPOR loan.

    Assuming you keep your LVR below 80% then you can draw as much as you wish.

    If the LVR is high enough you can keep the offset money where it is or deposit into the loan to reduce the nondeductible debt. Unless you have plans to turn the ppor into an IP and buy a new ppor - in this case leave it in the offset account.

    Hope this helps

    Cheers,
     
  14. Sk3tChY

    Sk3tChY Well-Known Member

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    Simon would be the best to ask about this. (He just beat me to it)

    Depending on the effort you'd like to go to, you could simply change your current loan on the PPOR to IO. Theres no need for an offset account, because you want to maximise your good debt.

    If you gonna be buying a new PPOR, and using the old one as an IP, then just make sure to have your IP set to IO, and only knock down principal off your PPOR, because that debt is non-deductable.

    Are you going to be buying another PPOR, or no?
     
  15. DaveA

    DaveA Well-Known Member

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    i think you need to reconsider this a little bit...

    if he turns it to IO and has no offset accout, how is this going to help his situation?

    would he put his cash into an ing account earning 6% (taxable) while paying a mortgage of 7.5% (doesnt matter if its deductable)...

    An offset would be a manditory if you have an IP and no PPOR as its the best place to store cash....

    Offsets wont effect how much good debt or bad debt there is, its a seperate account
     
  16. MiddleClassMonkey

    MiddleClassMonkey Well-Known Member

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    So Dave are you saying I should go Interest Only with a separate 100% offset account. Then a separate LOC for investment purposes (for the shares/MFs)? Are these three separate loan applications? Or two? (or one??)
     
  17. Sk3tChY

    Sk3tChY Well-Known Member

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    I know this, I was assuming he'd be buying another PPOR, and using the original loan for IP purposes only.
     
  18. Sk3tChY

    Sk3tChY Well-Known Member

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    If your not buying another PPOR then yes, set it to IO with a 100% offset account. And just store your spare cash in there, because essentially your earning about 7-8% untaxed, as opposed to 5-6% taxed if it were in a typical savings acc.
     
  19. voigtstr

    voigtstr Well-Known Member

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    I'm in a similar position, just with a shorter timeframe.
    I'd like to go shopping for a new ppor around Jan 2009. The current ppor is a villa unit worth 200k, we owe 167k. New ppor we would look around 280k.
    during 2008 I'll be putting all spare cash into a managed fund (most likely Navra)

    The current loan is fixed interest P&I at 6.74% no offset, no redraw. We were paying 600 a fortnight but are now paying 520 a fortnight.

    The new loan I'll make sure will have all the bells and whistles (and I'll probably get Simon to set it up)
     
  20. Sk3tChY

    Sk3tChY Well-Known Member

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    6.74% dayum.. nice compared to the 7-8% goin around these days..! :p