LOC for debt recycling - any recommendations?

Discussion in 'Loans & Mortgage Brokers' started by KayTea, 22nd Jul, 2018.

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  1. KayTea

    KayTea Well-Known Member

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    I'm looking into using a some of the equity in our PPoR to acquire a LOC loan, in order to set up a debt recycling strategy (as per Peter Thornhill's approach to paying off a mortgage). I'm not looking at borrowing a huge amount (as we still need to be able to make the monthly interest repayments from our household budget - likely to be $50K-$100K, based on equity and repayments), however, as per PT's requirements, the loan must be:
    • line of credit
    • interest only (5 years minimum would be good)
    • easy to pull down additional funds on a rather regular basis (in line with dividend repayments)
    Can anyone recommend a bank/lender they've used, or know of, that would be a good provider for this type of loan?
     
    KayTea, 22nd Jul, 2018
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  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Many LOCs for longer term debt can be a Pain, expensive, part recalled ( ie limit shut down) or fully recalled on demand when times get tough for the borrower, the lender or the economy generally.

    I have not had a LOC called in for a client, but have had Limit reductions applied through no actions of the borrower.

    Simpler solutions like AMPs global limit facility or a clunky DYI version of same via CBA or wbc can tend to be lower cost and more risk managed,

    A stand alone LOC would require one to get a second mortgage with the first funder.

    The only market advantages for LOCs generally are many can be capitalised if within limit, and many are evergreen - ie IO for 30 years

    ta
    rolf
     
    Rolf Latham, 22nd Jul, 2018
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  3. KayTea

    KayTea Well-Known Member

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    Thanks @Rolf Latham. So is it worth looking into the AMP product you've indicated, or is it a better option to look at a different type of loan altogether (but one that works the same as a LOC, in terms of debt recycling)?
     
    KayTea, 22nd Jul, 2018
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    depends.

    how long is a piece of string.

    In our FP practice, peops prefer the AMP global limit product, but may not have the val, or the servicing so we need to valuer shop with diff lenders.

    the AMP product is bees knees for set and forget.

    Destiny used to love the STG portfolio product, where u can have locs and vary limits, fixed variable etc - again though needs the LOC to work.

    lenders that DONT do DR well on basic products include ING, ANZ NAB and many others

    ta

    rolf
     
    Rolf Latham, 22nd Jul, 2018
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  5. Terry_w

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

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    See my strategy post on using amps master facility to debt recycle
     
    Terry_w, 22nd Jul, 2018
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  6. KayTea

    KayTea Well-Known Member

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    Will do @Terry_w - thanks heaps
     
    KayTea, 22nd Jul, 2018
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  7. KayTea

    KayTea Well-Known Member

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    I've read through it (as best I can on a phone screen, surrounded by noisy kids at a sporting comp) .......

    Would I need to move my PPoR loan(s) over to AMP in order to set this up, or can I keep my existing loan structure with my current lender and take out the AMP loan as an additional borrowing?

    Also, can I take out the AMP loan in my name only, or would it have to be in both names (if the PPoR and existing Liam's are in both names)?
     
    KayTea, 22nd Jul, 2018
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  8. Terry_w

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

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    You will need to mortgage a property to get a loan and AMP wouldn't do second mortgages so you would need to 'move' any existing loans secured by the same property over to AMP.

    If the property is owned by 2 people then generally both people would need to be on the loan as both need to give a mortgage of the jointly owned property. You could potentially get the loan in one name with the other owner providing a security guarantee, but I can't really see the point in doing this
     
    Terry_w, 22nd Jul, 2018
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