Wasn't sure what to name this thread so hopefully the explanation does it justice. I'm ready to buy my first ip (And lost at auction the weekend past) and a broker advised I can get 3.98% on an io investment loan. Assuming I accept this rate and utilise an offset account I'd like to mitigate my loan repayments but am not sure about the finer details of doing the following: Have a 3rd party, (family/spouse/friend) wire/transfer however $x into my offset to bring down my repayments. In turn I will pay them a rate better than what they could earn by keeping the money in their own bank account. This should fall somewhere between their ror and my i. Has anyone done something similar to this or have an idea as to what the implications of doing so are? Also does this have to be agreed with an institution to prior to taking the loan? Thanks! Edit: mod please move this to finance
What if you die? How do they get their money back? You should have a written loan agreement between them. Each should consider separate legal advice. They should consider the risks for them and consider whether to take security for their loan and what type. Also consider the tax implications. No need to tell the bank about this unless the lender will be lodging a mortgage or a caveat over the property.
If your bank provides a facility to have multiple offset accounts linked to the loan consider setting up a dedicated offset account to hold the third-party funds. You can then have another offset account that holds your own funds and keep the two seperate. Will also allow you to run balance / reports against the individual accounts.
Thanks for the responses. In terms of an exit strategy for my money I am comfortable I can put a plan in place (formal or informal) and don't plan on dying any time soon as I am a healthy mid 20's male! What kind of tax implications could I expect to encounter and manage? The idea of multiple offsets to track cash flows is a good idea that I will inquire about.
Consider the other party could die before you or either of you could lose capacity. You need to properly document the loan.
Back in the supposedly "easy times" in the 1970s you had to have a certain level savings for the previous six months to qualify for a savings bank home loan. Yes, you not only had to save the deposit, you then needed to wait six months to apply! Hubby's parents loaned us money to put in our account to ensure we got over the line. We did, and paid them back. I guess the fact that hubby is an only (surviving) child simplified matters. Marg
This part did make me laugh. Remember that accidents and unexpected illnesses don't discriminate on age! If you go down this path, definitely get a formalised agreement together to protect both parties interests.
