Master Limits

Hey All,

About to start setting out a road map for my future investment portfolio.
My PPOR is currently being built and upon completion I need to revalue and draw every drop of equity.

My future plan is going to be a combination of shares, property with an aim of small development (subdivide, renovate, construct and sell 1 keep 1) and potentially investing into some businesses.

I am aware of "Master Limits" but apart from the name and a very basic understanding I was hoping to be enlightened as to how someone in my situation where I want to invest into multiple vehicles quickly and easily could really benefit from it and how it may look.

I am guessing my PPOR would be valued at around 850k with a loan against it of 500.
Don't mind paying some LMI to get access to more.

So saying I went to 90% I would have around 265k to invest.

Also just to make sure everything is covered off I would also consider putting a pool into the house, say 50k.

Example would be a big help

 

Master Limit - AMP
One off fee of $295.
Up to 10 sub accounts .
Nine of the sub accounts can be fixed or variable rates. One sub account must be a LOC. Min Required for LOC is 20K .
Great product

 

AMP is the best out there for this atm

Strategy: Using AMP’s Master Facility to Debt Recycle https://www.propertychat.com.au/com...ng-amps-master-facility-to-debt-recycle.16449

 

Another +1 for AMP's master limit. Overkill for 90% of people, but if you're having a fairly fluid overall portfolio buying property, shares etc and want to chop and change the balances often it's by far the front of the pack for ease.

 

I take it this a portfolio lending solution? Does this not involve cross colateralisation?

 

No you can set this up on one property. no need to cross.

 

Think of it as one big loan, broken up into smaller sub-loans that you can change the limits to as you please without having to re-apply. Provides a lot of flexibility and can be used for various purposes. Can have a single security.

 

Can anyone comment on the term only being 10 yrs I/O? AMP has mentioned that the LOC would be a 30 yr term but P&I from the 10-30 yr mark.
Ideally I was looking for a LOC that had a least 30 yr I/O to give flexibility for long term investment strategy i.e. 20 yrs plus

 

The master limit facility has a term of either 5 or 10 years. Different to loan terms and IO periods.

 

Ah so the LOC is necessary to have but it's not where you get the funds for investment? The funds for investment are obtained via a loan split once you have paid off and therefore split that amount from your P/O loan.
So am I right in saying that the loan splitting is more of a feature in the AMP master limit rather than the LOC?

 

Most of my clients don't use the LOC. They keep it at $10k and just let it sit there as an unused facility. It could be considered an emergency fund.

see
Strategy: Using AMP’s Master Facility to Debt Recycle Strategy: Using AMP’s Master Facility to Debt Recycle

 

Not one of Terry’s clients, but I do exactly as he said - have the $10k LOC with my AMP master facility but don’t use it. Basically all my other splits are P&I. Fairly simple form to change the amount available on each split.

Regards,

Jason

 

Same.

A couple of other things I like
- can transact directly from loan account splits
- can attach visa debit cards directly to loan accounts OR to offsets

 

I guess the only benefit with the LOC is that it is I/O for the first 10 years. I/O would suit my investment style for now. I assume when I split my owner occupied loan that is P&I, the split will need to be P&I too?

 

Not necessarily, never assume
Quite often as part of a debt recycling strategy the PPOR Debt (non deductible) is P&I and the Investment (deductible) split can be IO.

 

I have been given conflicting advice from AMP regarding this. It seems converting a PI loan to IO will mean a reassessment, even when on the package. Not sure how deep a reassessment though. In the past some clients have just given some payslips and this was enough, now it may be different

 

Yeah I got the same advice for reassessment and that it will not be easy to convert to I/O.
Due to this, the LOC really is a better option. It provides flexibility of I/O period as well as a rolling maximum limit. i.e. anything that is paid off of the PI loan increases the LOC by the same amount.
i.e. PI loan 300k, LOC 50k.
If you pay off 20k off of PI,
then the new balance is 280k PI and LOC 70k

This 70k, if kept fully separated, can then be invested as a fully deductible loan. Yes the LOC has a 0.5% higher rate, but as fully deductible still be better off. Has anyone used their LOC in this way? I plan to continue this structure until have the PI loan fully transferred to LOC.

 

Yes serviceability is checked and they will check servicing to apply the Master Limit anyway if it was not applied to the original loan product. If servicing passes it's not hard to make the new split IO at all. If servicing doesn't work with AMP then Macquarie can be a good alternative.

 

LOC's are repayable on demand, separate IO loan splits are not. It's not hard to apply IO to the new split if serviceability passes.

 

Or as your P&I loan decreases submit the form and create or increase an existing P&I split for investing puposes up to your master limit again, and drawdown. Rinse and repeat.

The great thing about a master limit is that any principle you pay is immediately available to you again under the master limit.....