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Need some quick help on LOC

Discussion in 'Finance & Banking' started by dkmc, 26th Nov, 2007.

  1. dkmc

    dkmc Well-Known Member

    Joined:
    24th Aug, 2005
    Posts:
    165
    Say Ive got 4 IPs - all interest only loans with the same bank

    IP1 - 3 different loans - 1 of these is fixed
    IP2 - 2 loans - 1 of these is fixed
    IP3 - 1 loan
    IP4 - 1 loan

    I want to buy IP5 and have had them all revalued
    I wish to get a line of credit

    Do I get a LOC secured against all 4 IPs - yes its cross collateralised
    This is the easist way

    Do I get a LOC for each IP - wont this result in a total of 11 different loans

    Or do I refinance IPs such that each IP has 1 loan - and it is a LOC?

    thanks for reponses
    Ive read the article on the site
     
  2. tailcat

    tailcat Well-Known Member

    Joined:
    18th Jun, 2007
    Posts:
    96
    Location:
    Yeppoon
    How much equity do you have in each IP?

    Is there enough equity in one of the IPs to cover the deposit and all your costs for IP5?

    If IP1 or IP2 cover the above then it may be possible to convert (and extend) one of the existing loans to an LOC.

    Do you need an LOC? Does your bank have IO accounts with free redraws?

    Tailcat
     
  3. dkmc

    dkmc Well-Known Member

    Joined:
    24th Aug, 2005
    Posts:
    165
    using 80% - the amount of equity I have available is
    56000 in IP1
    41000 in IP2
    39000 in IP3
    58000 in IP4


    Theres enough equity in IP4 to cover deposit and costs

    I want to extract the whole amount - so that the rest can go towards shares

    "Do you need an LOC? Does your bank have IO accounts with free redraws?"
    Not sure I understand it. Im with ANZ.
     
  4. tailcat

    tailcat Well-Known Member

    Joined:
    18th Jun, 2007
    Posts:
    96
    Location:
    Yeppoon
    As a bench mark (to judge other options by):

    Use the equity in IP4 to buy IP5. (Set up a separate account (against IP4) for deposit and costs so you can keep track of what goes with what. Suppose you sell IP5 later, you know which accounts to pay out...). Get an IO loan for 80% against IP5.

    If you need to capitalise interest, think about setting up an LOC against another IP. Pay for your IP running costs out of this, but pay interest on this account from your wages.

    I would then investigate setting up separate accounts against each of the other IPs individually to do the share investing. DO NOT cross collateralise just to buy shares!!!!!!!!


    You need to look at how frequently you will be accessing each account and in what way. LOCs are the most versatile, but generally carry a higher interest rate. Suppose you have a buy and hold stratergy and want to buy $41000 of BHP shares. If you set up an IO loan against IP2 to do this then this account would never be used for other transactions so why pay extra interest on it by making it an LOC.

    In today's electronic banking era. you can usually move funds from a `basic' account to another account that has b-pay, cheque-book etc attached to it. So keep as many accounts as `cheap' as possible an `work' out of one account.


    I do not know ANZ's products well enough to comment.


    Tailcat