longreach

I hear wht you are saying. It's obviously not free but there are no repayments. Like I said, interest is debited monthly to your account based on the capital balance over the period.

It's difficult to illustrate on a forum but I'll try a simple example...

Line of Credit Opening Balance: - $100,000
Monthly Income: + $10,000
Interest Charged @ 7%: - $588
Closing balance for month: - $90,588

Pollyana

Have to say that Longreach's posts look OK to me - he is offering details and an opinion but isn't asking people to use his services.
As for his signature, as long as its his own company that's in his signature, then thats fine Same as migration agents, relocation agents etc who are all users of BE

ABCDiamond

You and me both And no doubt many others

ABCDiamond

But what do the people live on ?

This will only work if they have loads of excess disposable income every month.

Unfortunately there are people who will believe what they see and expect it to work exactly like that, and have that amount left in the bank at the end of the month. Those are the people who get right royally done over.

freebo

In that case, I bow to your witchy wisdom

longreach

I wish there where more. It is true that the average first home buyer focuses on the affordability now and not consider the what if's of the future.

Getting back on topic, I think the consensus is that rates will increase over the next 18 months... even though there are a lot of uncertainties - Europe, USA, China, local tax reform just to name a few.

And I think the whole financial industry needs examing for some lending practices. I do know a lot of brokers are leaving the industy due to new licensing regulations that come into force on July 1st.

freebo

And many of these are today's first time buyers. But its ok, capital appreciation will save them

freebo

*Sigh* and I was just about to go to bed, thought we'd agreed to sort-of disagree.

Are you really saying this is a good market for first time buyers Maybe I misunderstood, you're saying affordability will get much worse, right?

I'm a 4th time buyer and I've banked the profits and am out!

EDIT: Appologies, I re-read your post and quite righly you are saying FTB's should be cautious.

longreach

I did say it was a simple example, that's where the 55 day auto sweep credit card comes in. It's impossible to show exactly on a forum.

Any excess disposable income will shorten the term of the loan... and remember this will compound over time.

It does require people to budget (as they should anyway) effectively to ensure they maximise their disposable income.

Finally, as I said, you should ensure that any facility reduces in line with a normal mortgage term to ensure you at least pay it off in 25 years.

longreach

????

I hadn't realised I was responding to you directly with this post.

It's a dreadful market for first home buyers - both in terms of prices and lending policy.

freebo

No, we're good on those points, sorry for any confusion.

I also believe its a bad market for any one and that prices will fall in all of the capital cities, but that's just me and why I haven't bought after my last sale.

longreach

No worries - the joys of forums. Easy to misinterprate.

We'd better leave that debate for another day

ABCDiamond

One quick question, how do they pay it off without any repayments ?

Many established borrowers will not feel much pain with interest rates returning back to the levels that they had before, but it is these recent first home buyers that are the ones that are being hit hard.

In my view some of them, the ones heading for trouble, were not savvy enough to understand what could happen, and therefore would be unlikely to handle a product such as you are discussing.

coolshadows

I'd agree to be sceptical.

"no repayments" - what a load of cr@p. That's why some 'financial experts' are crooks.

What is the houshold income being used for? The only good idea for paying off debt (and fast) is having strict control of your finance.

Using a shared account is likely no better than putting every 'spare' cent in a high interest account, whilst having a low interest mortgage account.

Techno Freak

Having a shared account is WAY better than a separate mortgage and savings account, as long as you are a tax payer and especially if you a re a high rate tax payer.

What’s a good term deposit these days? 7.25%, and the cheapest mortgage rates maybe around 6.5% - 7%, call it 6.5% as you say find a ’low interest mortgage’.

So, you put every spare cent in your 7.25% high interest account, use $1000 over 12 months as an example, after 12 months you’ve made 7.25% interest, ($72.50), but you then pay your tax on that, assume you’re in the 30% band, so you’re net interest on the $1000 in a high interest account is $50.75

Take that same $1000 and dump it into your shared offset account instead. After 12 months that $1000 has saved you the interest at your mortgage rate of 6.5%, no tax to pay as it hasn’t generated any income, so you’ve effectively paid $65 off your mortgage.

Not having to actually move money into the high interest accout means every single spare cent sat in your shared acount is working at a net profit rate equal to your mortgage rate, tax free.

The higher your tax band and greater your left-over money each month, the quicker you bring down your mortgage.