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LOC package advice - How to manage splits?

Discussion in 'Property Finance' started by chylld, 11th Sep, 2015.

  1. chylld

    chylld Well-Known Member

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    Hi all,

    Playing with the Macquarie LOC home loan package for my PPOR. Currently 1 large split (say 950k) and 1 small split (say 50k), small split nearly paid off.

    Property is unlikely to become an IP in the future (low yield, I'm poor, etc), so the large 950k split will be paid down next. However in the event I need emergency cash, I don't want to redraw on the large split as that would count as a new borrowing and would contaminate the purpose (in the off chance it does become an IP.)

    The small 50k split will be used for investments so I can't touch that either, so I need a third split. Called Macquarie and was asked what limit I'd like on it. Caught me off guard as I thought the available funds (from paying down the small split) were redrawable on any split - but no, each split has its own limit (950k and 50k). So the third split would need to take some limit from one of the existing splits.

    Thing is I don't know how much I'd need in an emergency. Can anyone with LOC package experience give me some pointers? Or do I just wait until I need $x emergency funds and then split based off that?
     
  2. Rixter

    Rixter Well-Known Member

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    What's the intended purpose of the 3rd split?

    If it's for personal then taking available funds from your $950k split would not contaminate it.

    If it's for investment then just increase the limit on the existing $50k split. So reduce $950k limit by $x and add it to the $50k.
     
  3. chylld

    chylld Well-Known Member

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    3rd split is just to withdraw emergency cash.

    As a PPOR loan there is no contamination if I redraw on the $950k split, but if the PPOR becomes an IP then that $950k loan is not 100% for the property, and tax deductibility becomes very complicated especially if I've paid it down and redrawn multiple times. One of Terry's tax tips covers this...

    Otherwise managing splits like you suggested sounds logical as far as adding investments goes. I've also heard of people accumulating multiple $50k splits....
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I would just get them to split the $950k LOC into a $50k and $900k split. Pay off the $50k first and then use this for emergency funds if need be. maybe a smaller amount.

    Macquarie's IO loan can also be used like a LOC so maybe consider converting to an IO with offset
     
  5. chylld

    chylld Well-Known Member

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    I assumed it would have behaved like a normal svr, i.e. paperwork required to split the loan?
     
  6. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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    Do you have a 'master limit'...? Depending on which product or LOC you have you may be able to have up to 10 'sub accounts'. I'd be having an offset account linked to each sub account to deposit surplus funds, regardless of whether you PPOR may become an IP I would be using an offset account.

    Thats how I've done it anyway............ :D
     
  7. chylld

    chylld Well-Known Member

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    An offset would make things very easy, but the macquarie loc package doesn't come with one :(
     
  8. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Macquarie IO w/ offset is the way to go but the problem with Macquarie is that you would need to submit a new application if you are changing from LOC to Offset with is a major PITA as you would need to service the debt and also it would be the conditions as per Macquarie's policy today which isn't crash hot.
     
  9. chylld

    chylld Well-Known Member

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    Will make do with the LOC package for now... nice to be able to split without paperwork.

    Checked the Macq svr rates just now, 4.29%... LOC package 4.34%. I signed at 4.49% which is the rate displayed when I log in; will it be automatically be updated to 4.34%?

    Edit: called Macquarie, they said that the new 4.34% rate is for new business only and can't be applied to my loan :( sad
     
    Last edited: 14th Sep, 2015
  10. aujahua

    aujahua Member

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    Which bank are you with ?
     
  11. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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    You can get that through MQG or AMP or St.George.
     
  12. aujahua

    aujahua Member

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    Hi Chylld,

    For your Macquarie LOC loan, do they give you a cheque book that linked to your investment account ? So you can pay stuff like deposit for a investment property etc.

    As Terry suggest, detour is not a good approach.

    Thanks
     
  13. aujahua

    aujahua Member

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    I checked AMP and St George, they say offset account linked to a LOC loan is not possible.
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No lenders offer offsets on LOCs as far as I know. Would be good if they did, ut they seem to think that there would be no need for an offset if you have a LOC as money can be deposited in. But they are fogetting about th e tax issues.
     
  15. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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    From AMP website today (I have AMP LOC and have an offset account for each sub account, it can be done, however I am not sure AMP are taking new business for investors)

    The great Australian dream of owning a home can often seem like a long and winding road. Who wouldn't like a head start on owning their home sooner?

    To help you get ahead, we are offering $1,000 Cashback^, for a limited time only. The cash will be deposited to an Offset Deposit Account on settlement of the loan.

    To qualify for the Cashback offer, your loan:

    • application must be received between 29 June 2015 and 30 September 2015 and settled by 30 November 2015;
    • must include a variable rate loan linked to an Offset Deposit Account;
    • must be for an owner occupied purchase or refinance; and
    • must be a new loan (not an increase or other variation to existing AMP Bank loan).
    Whether you are looking at buying a new home, paying off your home loan sooner or simply want to refinance your home to AMP Bank we have a solution for you.

    When you choose a Professional Package loan you’re able to select from a range of innovative options to tailor your banking and your loan to your needs.

    Looking for ways to build assets and future wealth? An AMP Bank Professional Package is a very flexible home loan of $100,000 or more.

    Not only do you have the flexibility to pay off your home loan sooner, you have the option of a master limit—an overall pre-approved lending limit, ready to use when you need it. It can provide the flexibility to restructure deductible and non-deductible debt, as your needs and goals change over time. All without the need to re-apply for funds.
     
  16. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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    AMP do offer that, I have that with them now, up to 10 sub accounts and 10 offset accounts, it is handy as it adds flexibility if you have spare funds. Im pretty sure MQG and St.george offer the same thing according to my broker.
     
  17. aujahua

    aujahua Member

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    Maybe you were lucky Rico, I check the website and says

    A line of credit is not eligible for linking to an Offset Deposit Account. If your loan is linked to an Offset Deposit Account, no interest offset benefit will apply.

    https://www.amp.com.au/personal/home-loans/products/home-loans/professional-package

    Click understand professional package line of credit
     
    Last edited: 19th Sep, 2015
  18. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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    That is correct, but sub accounts can be linked to offset, therefore my LOC is the minimum 10k split req and I dont use it, all my sub accounts are linked to offset. Call them and ask.
     
  19. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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    Create a home loan that's easy to manage
    You can combine features and banking products to create a home loan with access to your funds and extra repayment ability. You have the flexibility to:

    • choose a 100% loan offset facility with a variable rate loan
    • select from variable rate, fixed rate and line of credit home loans
    • access funds with linked bank accounts
    • qualify for a master limit to meet your overall borrowing needs.
     
  20. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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    Under the one loan you have LOC AND Variable rate loan accounts, to get offset your sub accounts will be variable interest loans -

    Understand Professional package variable rate
    Hide
    • No monthly Account management fees
    • Ability to make unlimited additional payments on your introductory variable rate loan whenever you like without incurring Early repayment fees
    • Option to access a master limit1
    • Link an Offset Deposit Account to your introductory variable rate loan
    • Automatic roll over to our Professional Package variable rate loan (receive up to 1.00% pa1 off the Classic variable rate) at no extra cost
    1 A master limit is an overall limit—up to the maximum amount you can borrow—approved when you first apply for your loan, and available for future investment needs for up to 10 years. You only make repayments on the funds you use—the balance remains pre-approved and on stand-by. A master limit Application fee applies. Please refer to the Home loan fees and charges guide for details.