Strategy: Using AMP’s Master Facility to Debt Recycle

Depends on what type of loan it would be.
3.85% for PI or IO at the moment where the security is owner occ property.
LOC is 0.15% higher I think.

 

Sorry I wasn't overly clear.

Say you have a PPOR with loan at 500k. So understand rate would be 3.85%.

You then have the master limit with 200k at that time it is not drawn so RATE is somewhat irrelevant.

You then split out 50k to buy some shares. Does it have the same 3.85 rate or when you do the split online do you need to declare its investment?

 

Yes, this is what i understood your question to be. Security is owner occupied house so lower rate.

 

Yes. The purpose of the funds isnt what determines your rate at AMP. The security being used is what determines your rate.

If its a PPOR security, the rate at the moment is 3.85%. Or a little dearer for the LOC - which is why you only want a 20K LOC split. If there was no requirement for the LOC as part of the Master Limit, it would actually become a redundant product. The LOC I mean , not the Master Limit feature

 

Most brokers require you to fund your shares using a linked cash account, so it can't be directly funded by the AMP account. Is there any issue of "contamination" in this scenario where the funds go to your cash account first?

Also I have just setup a discretionary trust. Is there anyway my trust can make use of these cheap funds?

 

Brokers shouldn't be requiring borrowers to do anything.
Yes there is a contamination issue and also a issue breaking the nexus between borrowing and investing.
Get your loan advice from a broker and seek tax advice before implementing (not from the broker).

On the trust, yes, simply lend them to the trustee.

 

BTW, the master limit facility has been quietly withdrawn from AMP for the time being.

However AMP are still one of the best for debt recycling because they allow up to 10 splits and they also allow for existing loans to be split later after being taken out - for a $350 fee.

 

I think you misunderstood what I was saying. I was referring to stock brokers, they normally want the shares funded from a cash account that goes with share trading account. So just wondering how to I get the money from AMP to fund my share purchases and make sure the interest is still deductible.

 

Oh, ok.

See my tax tip 1.

 

Indeed - even without the Master Limit being unavailable for the time being they do tick the boxes for most scenarios. With a little foresight in structuring the loan early you can predetermine rough split amounts too (up to 10 facilities) - so you can split when you need specific amounts, whilst having a range of different amounts which can be drawn from when needed.

We've got a growing list of clients and members from this forum and others which we're updating as soon as the product returns.

 

Well ahead of the curve on this... I have been using Master Limit as the tool of choice for the past several years for majority of my clients. In my view it was THE go to product for anyone with a PPOR with good amounts of equity, seeking to build a portfolio where that equity was to be used to provide deposits + costs.

On a side note - competing product (Portfolio by STG) which isnt quite as flexible - well lets be honest - it isnt even nearly as flexible - has just had its servicing calculator savaged. Portfolio borrowers will now have debt assessed at P&I over 20 years.

 

Indeed - the STG product is a festering mess in comparison. Over the years I've had a steady stream of ex-Destiny clients who have been setup on the St George/BankSA portfolio facilities - paying a premium on rate, cross collateralised and backed into a corner. Remove cross coll, reduce rates - what's not to like.

 

I've seen a lot of these too. I call them destiny refugees.

 

This is a great posting, but given that I only understand the 'basics' of LOC/loan/debt recycling etc, I found that I got incredibly lost (it's not your explanation - it is very detailed, and gives great examples - I just can't take it all in).

The AMP product sounds great, but I feel that trying to get my current loan setup moved over into this kind of setup would just about kill me, and totally wipe out the few remaining functional brain cells I have left.

 

Its rather simple really. You pay down bad debt and borrow to invest = converting bad debt into good debt. Your tax advisor can work with your broker to set something up even without using AMP.

 

Any news on the reinstatement of the master limit product by amp?

Also any experience with nab portfolio @euro73 @Corey Batt

 

No news.

Nab is crap for changing loans around.

 

******* crap!

 

Still kaput - the only way you can access the master limit at the moment is for new purchases - refinances are a no go for the time being.

You can otherwise emulate most of the benefits with AMP via a standard refi with multiple splits pre-setup - but this is if you already have IO amounts to refinance over OR the full debt is P&I - AMP just will NOT provide you with IO limits for refinances greater than what you already have.

Rolf and Terry have adequately summed up NAB when it comes to needing a fluid facility setup.