Getting a Loan for Share Investments at Home Loan Rates

Discussion in 'Share Investing Strategies, Theories & Education' started by Pleep, 22nd Jun, 2018.

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  1. Pleep

    Pleep Well-Known Member

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    Interest rate question:
    It appears I cannot get a loan for share investment purposes secured against my PPOR for the same rate as my home loan. Apparently APRA doesn’t allow it?! It’s looking like 0.5% higher than homeloan (note: I have plenty of equity & serviceability to spare).
    Loan needs to be separate for tax purposes. Has anyone managed an investment loan at home loan rates? Are my expectations too high? The investment rate would be variable at around 4.1% on current rates.
    Thanks in advance for any help from the great ppl on this awesome site!
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Nothing to do with APRA, that's just the excuse the lenders are using.

    They have different pricing for owner occupied loans and investment loans. A loan used for share investment is an investment purpose so lenders will apply investment rates to it.

    There are some investment loans as low as 3.89% depending on the circumstances.

    There are also some (very few) lenders that take the position that if the security property is your own home, they'll do the loans at owner occupied rates regardless of how the money is used.
     
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  3. Pleep

    Pleep Well-Known Member

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    Thanks
    Thanks Peter. Really appreciate your reply and nice to know. Whilst I appreciate banks see shares as more risky, serviceability and security backing are exactly the same.
    Must be that APRA became the excuse after the publicised changes recently and now it’s the throw away line.
    Thanks again
     
  4. hobartchic

    hobartchic Well-Known Member

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    You can get loans to purchase shares through major banks/ lenders but I would not recommend it. I would expect it is costlier than a mortgage due to the risk profile of shares.
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Many of my clients have loans for shares at OO rates. it is getting harder to do now, but it is easy to do with the debt recycling strategy.
     
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  6. Propertunity

    Propertunity Well-Known Member

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    If the tax deductible extra 0.5% cost for loan interest is such a big concern then I’d be seriously wondering if you have the right strategy for your proposed share investment.
     
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  7. lamecrocs

    lamecrocs Well-Known Member

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    FYI, a fixed margin loan with ANZ 4.6% and I believe their LVR on shares are probably the best our of all big 4.
    Although not the same as "property" loan, the rate is quite competitive. I believe Westpac could do the same if you ask.
     
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  8. hobartchic

    hobartchic Well-Known Member

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    Indeed. I still would not do it. Far too risky for my blood. Putting my own cash into shares carries some risk too but that's quite different to a margin loan for the activity.
     
  9. ttn

    ttn Well-Known Member

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    Unfortunately there are risks every where (shares, properties or bonds) ;)
     
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  10. Pleep

    Pleep Well-Known Member

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    No that’s not it at all. It’s not a deal breaker, but this 0.5% costs 1,000+ per year compounding and this loan will be there for 15 years perhaps. So I am doing a fair amount of effort to avoid giving up $20k future value.
     
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  11. Pleep

    Pleep Well-Known Member

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    Thanks for that. I’m certainly looking around for the best options. Appreciate your help.
     
  12. Pleep

    Pleep Well-Known Member

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    Hi Hobartic. Diversified stable share investments like old style listed investment companies consistently pay 6% p.a including thebtax credit. Then over long time periods the dividend/share market keeps risING despite fluctuations.
    Not for everyone I would agree!
     
  13. Pleep

    Pleep Well-Known Member

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    Wow they are offering a free toy if you sign up for $200k of investing Loan! Haha that’s terrible!
     
  14. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    There are second tiers that will fund cash out at rated lower than majors. Everything comes at a price

    Ta

    Rolf
     
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  15. Blueskies

    Blueskies Well-Known Member

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    Have you asked the bank what would the rate be if you were using the funds for substantial renovations to your PPOR? And then after the loan is set up, who knows, maybe you see some better opportunities in the share market...? ;)
     
  16. PandS

    PandS Well-Known Member

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    I got same rate as my ppor rate but that 2-3 years ago and I do it again either this year or next year, 3.87% been like that since the loan

    I borrow then I paid it off the lot in a few years with return, dividend and extra repayment and I start doing it again -:)

    Good way to go to build massive cash flow and asset if you know what you doing

    Bank do see it a more risky side so they mainly want to see you can service if it go down to zero etc...

    I don’t have issues with service or cash flow
    So it usually a 24 hours process every time I do it
     
    Last edited: 24th Jun, 2018
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  17. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Typically would need a build loan with progress payments and a that jazz.


    Ta
    Rolf
     
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  18. Blueskies

    Blueskies Well-Known Member

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    If poster has sufficient equity and serviceability shouldn't they be able to just set up a new equity loan up to 80% LVR?
     
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  19. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    2 issues
    a) cash out or letter from financial planner often needed
    b) investment rates usually
     
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  20. Pleep

    Pleep Well-Known Member

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    Hi PandS
    Would this be because your borrowing is a smallish amount or less than 100k?
    I cannot see how to private message you, but I am curious which bank you are with. Are you able to PM me?