Hi after people's thoughts on an aggressive strategy I'm contemplating. Just starting out my property journey and income and equity is something I'm building. But I still want to use the banks money as much as possible. Preferably want to use equity for deposits and credit for renovation. So the idea would be to get a 15 month interest free credit card to fund a reno and then once that is about to end do a balance transfer to another lender. At no cost on a 0% 18 month interest free period. Inclusive of annual fees The aim would then be to pay that down with future equity. I know this can effect your credit rating but by how much I'm not sure Thanks
There are 2 recent threads on this. 2 major problems 1. Effect on credit scoring with multiple credit hits 2. Effect on serviceability with the credit card limit
Okay I'll have a look. Would credit scoring be effected majorly? Considering everything is payed on time and would only do one or two balance transfers.. Yeah servacibility I'm not too worried about as the plan would be to have it payed off asap
This is a good read about serviceability it explains the effect credit cards have on serviceability. How much are you looking to spend on the renovations? Are they cosmetic or structural? Serviceability - what is it and how do banks calculate it? | George Raptis - Property Update
This would create problems. A $30k credit card will restrict your serviceability by over $100k (it's irrelevant if it's interest free or not). Taking out a large amount of credit cards without the right financial profile will affect your credit score dramatically. Also interest free cards aren't actually interest free. Read the fine print and you'll find loopholes via which the card issuer makes a lot of money. If you can't pay off the card in full within a year or two, it will cost you a huge amount of money.
Thanks! @Tony Fleming Would only be cosmetic, nothing major max of 10k. @Peter_Tersteeg yeah I wouldn't go up to that much. The plan would be, to have it all payed off through equity and cash after the interest free periods at minimum. I'll have a look into that fine print, cheers
If you're going to be actively investing or renovating a cash buffer is only prudent. $10k would be an absolute minimum I'd be comfortable with. I you can probably do this very easily with cash rather than a credit card. For what it's worth, I've dealt with a few people in varying degrees of financial hardship. They all had various reasons like illness, baby being born, etc. The one thing they all had in common was runaway credit card debt.
