State Custodians IO Owner Occ

Discussion in 'Loans & Mortgage Brokers' started by Wutang Financial, 4th Jul, 2019.

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  1. Wutang Financial

    Wutang Financial Member

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    Looking for any opinions from people with experience using State Custodians. Also are there any pitfalls with my proposed strategy or alternative products that might be a better fit?

    In the next 2-4 years we will have outgrown our current PPOR and will need to upgrade. At this stage we do not know which of the following options we will pursue:

    A) Transition current PPOR to IP and rent a larger place.
    B) Buy larger place and transition PPOR to IP.
    C) Sell existing PPOR and buy larger place.

    Each of the above obviously has pros, cons and different risk profiles. For the next few years I would like to keep our options open and maximize our flexibility. Which is why I have been thinking of refinancing with State Custodians IO loan with offset. We are pretty disciplined savers so the strategy will be to build up the offset using the additional cash flow from not paying any principal off. The 3.65 IO rate for Owner Occ with offset seems great. Or am I missing something?
     
    Wutang Financial, 4th Jul, 2019
    #1
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    State Custodians dont have an offset :)

    its a redraw offset..............

    which is fine as long as you understand the risks of a non ADI lender and your money.

    IO with offset is a good tax flex with your current scenarios A and B, and in theory I remember these things do work as dual accounts, so should be ok from a tax perspective, but Im no tax guy and you should confirm with your own tax adviser.

    Finally, just because a lender advertises they will do IO on owner occ...... dont count on that .

    Suncrap advertise a great IO owner occ rate, but its a B&S trick, and the product is not available unless you are a HNW low lvr super human.. and they will force PI

    ta
    rolf
     
    Rolf Latham, 4th Jul, 2019
    #2
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Rolf Latham, 4th Jul, 2019
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  4. Krisyd

    Krisyd Well-Known Member

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    I started with OO IO loan from State custodian, converted to P&I when they increased the interest rate for IOs, as did everybody else. From Interest Rate and Service perspective, State Custodian is great.

    However, as Rolf mentioned, not being an ADI, it has certain risks.
     
    Krisyd, 4th Jul, 2019
    #4
  5. Wutang Financial

    Wutang Financial Member

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    Thanks Rolf & Krisyd for the replies.

    I shall do some more research on the risks of having large sums in offsets with a non ADI lender before making any moves. Cheers
     
    Wutang Financial, 5th Jul, 2019
    #5
  6. Synergy

    Synergy Well-Known Member

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    What is a redraw offset? does this mean its not 100% offsetting?
     
    Synergy, 12th Feb, 2020
    #6
  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    It works just like a real offset from an interest saving perspective

    the 2 things to question are

    1. Is it a true dual account, ie will the tax office treat it as an Offset, and is there a PBR - possibly
    2. If you have say 200 k in the redraw then its not covered by the Feds, as it is with ADIs and/or APRA regulated lenders

    Best interest rates in the market atm!

    Loans aint loans

    ta
    rolf
     
    Rolf Latham, 12th Feb, 2020
    #7