LOC the next Pain Point......

Well people ...it looks like as banks de-risk the next pain points could be LOCs......either they will raise the interest of these where it is untenable to continue or force you to close them off...

Interesting times indeed......so be very careful...Offsets are okay...but LOCs facilities can be closed at the banks whim....interesting in deed.....

 

LOCs should be converted to term loans once used.

What about all the clients who were put into cross collateralised LOC loans with St George - clients of a well known book author and 'commentator'.

 

let me guess ...portfolio loan? Ole Advance bank product?

 

Who was that?

 

is that the same as changing to P&I?

my cba LOC rate has gone from 4.36 to 4.74 in a few months be nice to keep it for future use but says IO expires in a few years, may as well do P&I now

 

Sounds like Margaret Lomas.

 

Portfolio!

 

I would generally have said to an IO loan, but it would depend on the rate difference and a lot of other things.

 

Do ya realise you will pay about 20-25% more of a PI loan with 25 years left .......

 

One LOC is drawn down, change to normal loan?

 

I don't know what this means?

 

I presume what @Redwing means is whether you are able to convert the amount you have drawn down from your LOC to an IO loan or something?

 

I don't know what that means

 

Change the product from a LOC to a term loan such as an interest only or PI loan over 30 years.

 

What are the experts' views on IP LOCs these days, in light of the rising favour of P&I even for investment loans?

They've been a staple of my property strategy because they allow several IP expenses (strata, council, utilities, management etc) to be capitalised in new IP equity, which maximises deductions and speeds up debt recycling.

While I still believe that IP expenses should be capitalised in investment loans, I'm now not sure whether it's worth using a LOC (IO by nature) over an SVR (either IO or P&I).

An IO SVR is functionally the same as a LOC but with a lower rate, and messier to top up.

A P&I SVR is the same as an IO SVR, except:

• the funds don't last as long, so a topup is needed sooner
• less money available for reducing the PPOR loan (although this has been proven moot)
  
• less money available for funding new investments

 

I would still recommend them for tax reasons, but if the same thing can be done with a term loan even better.
Also many lenders allow easy conversion once drawn down.

Works well on AMP Master Facility on an owner occupied loan.

 

Thanks Terry, I feel inclined to keep the "current" IP LOC as a LOC until it's fully drawn down, then switch to SVR and create a new LOC at topup...

 

If CBA takes away my LOCs I'm pulling up stumps... no more Australian property investing for me.

 

Why not just split it now?

 

It's a relatively fresh LOC from last year's refi (old LOC was subsumed into IP SVR) so don't want to split just yet.