Switzer home loans? To good to be true...

hello people...

Did anyone see on Chanel 7 news about these guys switzer? If you have both a ppor loan and a investment loan they offer a 2% interest rate on the ppor and a 6% rate on your investment loan...

Making paying off your non deductible debt quicker and getting more tax deductions on your investment loan surely this is one of those to good to be true scenarios?

Cheers.

 

I don’t know how to post a direct link to view but try view this video on 7 news Facebook.. sounds like a game changer...

 

See below

Switzer home loans

Increase the numbers in the fields and rates drop

For more information on the two per cent home loan reducer loan, see the websites below:

HNW Planning

Vision property and finance

The Australian Taxation Office gave this little-known mortgage product the green light in 2015, and finance experts say for tens of thousands of investors trying to pay off a big home loan, it’s a win-win.

YES! The ATO office granted a product ruling to Loan Reducer “PR 2015/2” and is under license to Vision.

You can enter into this product knowing you're protected under Part IVA of the ITAA act 1936 and it will be treated as was intended.

Click here for the ATO product ruling or consult your Tax Agents for further advice.

 

The ATO dont need to say a thing. The people who rely on the product should be asking for a product ruling to prove they wont later be impacted. Without it they can face penalties later. Part IVA could apply - ATO disallows 100% of the deductible interest. Adds penalties for particpation in a scheme.

If I was a borrower I would be concerned since the ATO will later seek a s164 notice to identify all participants.

If there is a ruling I see no problem IF all elements are compliant

 

Ruling ended on 30 June 2017.

I would think the reason its not a scheme is that the investment loan element has a higher rate but the average rate across the loans is not unreasonable for the issues of risks for investment. The home portion is based on a .50% margin to cash rate.

It has limited application to avoid the scheme elements and its specifically not a split loan type arrangement. Its also a defined 2 year (max) period. A honeymoon deal of sorts. A discount that benefits one portion of the loan and not the other.

 

Nice idea, but the higher than market rates kill it for me.
The PPOR rate might be 0.5% lower than what you can get on the market (evenly matched PPOR and IP amounts), but the IP loans are 2% higher. Even if you get 38% of the 2% back, it's still 1.24% higher and on balance (once PPOR and IP loans are taken into account), 0.74% higher than market rates.

 

Thanks for the feedback gentlemen I got a little excited at first... haha.

 

The product has been around for a while - the rate variance is at a maximum that low for the owner occupied rate, in reality to achieve that you need a circa 1:3 owner occ to investment debt ratio. Doing basic numbers in the past I found that you generally come out significantly better off if you just have a sharp rate on both the owner occ and investment loan.

 

Good to know this product is ATO-approved. Anyone with decent cash in the offset, who moves the offsetbetween investment and PPOR would be getting the same results (less interest on PPOR, more on investments).

I ran my numbers through the Switzer online calculator and the estimated PPOR rate is 4.5% (vs current 3.9%) and investment rate is 5.95% (vs ~4.5% currently).

Then again my PPOR:inv ratio is 1:5. Outside "ideal customer" parameters probably.

Loading a 1:1 ratio into the calc gives 3.15% for PPOR which is fairer.

 

Sorry Im still confused. Would this be a good idea for someone like me?
PPOR mortgage 370k (offset almost empty)
3x IP mortgages totalling 1.5 mil?
I like the idea of getting a head start to pay the PPOR right down quickly

 

Given your offset is almost unused so a 2% interest rate on your PPOR would be a win. If the total PPOR+investment interest balances out compared to what you're currently getting then it'll be worth a looksie. Worst thing that can happen is you go "nah" and stick with your current bank(s).

Personally my numbers are similiar to yours but my PPOR offset is used moreso pivot loans dont make sense to me... unless it's 0.2% or whatever $9 a month interest is.

 

I put together a spreadsheet to compare the costs of a regular home and investment loan, verses what they're offering.

The rates I've used are what quite a few lenders are offering for P&I owner occupied and investment rates. I've also used rates from Pivot's rate calculator:
Pivot Loan - Switzer Home Loans

I've tried to include gearing benefits, by adding rental income and a guess of monthly holding costs. There are probably some errors in this calculation however.

Despite potential errors, I suspect people's cashflow would probably be better off with regular home and investment loans.

I did an even quicker comparison of interest only rates, but the number of variables starts to increase. The results were also worse, significantly more so when you take into account what happens after the interest only period ends.


The thing is, this type of loan is easy to sell because you can convince people they'll pay off their home loan faster, which is actually true. Overall however, their loans will cost them a lot more. This is hidden by suggesting that negative gearing will make up for it in the tax return, but people never really properly compare that component.

 

With Switzer's, it's not even allowed to be x-coll (says so in the product ruling 2017/13, valid until 2022. Vision PF's has expired and cannot be relied on).