A Random Person’s Random Investments

May 31, 2007

Still a bit confused precise operational aspects of these home loans work…

Filed under: loans — arandomperson @ 9:48 am

Well I’ll continue to shoot off emails to the loan providers and see if any of them reply.

excerpt from aus.invest thread:

On Sun, 27 May 2007 13:07:35 +0930, Fredd wrote:

>>I am considering a “line of credit” type home loan to buy a house so I
>> can continue with my regular investing in shares, using the equity
>> developed in the home loan further down the track.
>>
>> Accountant thinks this is fine (tax wise) as long as I get seperate
>> accounts on the loan to draw a line between the tax deductable and non
>> tax deductable parts of the interest paid.
>
> An ideal method of funding investment in that residential real estate
> secured loans are invariably the cheapest form of finance. Two caveats
> however:
> 1. Any borrowing can greatly magnify your losses so you need the
> knowlege, confidence, and financial ability to be able to hang on even
> if your investment tanks in the short term or the income from it dries
> up.
>
>
I already have a margin loan and I am comfortable with the increased risk
aspect.

> 2. Your accountants advice that you get ” get seperate accounts on the
> loan to draw a line between the tax deductable and non tax deductable
> parts of the interest paid” is absolutely essential. If you contaminate
> the loans you will lose the tax deduction. By contaminate I mean mix
> business and private sections, because then you will be unable to
> unambiguously satisfy the tax dept as to which dollar of loan interest
> or loan repayment related to private or business. Tax law requires that
> you be able to unambiguously attribute interest expenditure to a
> specific asset, not just on an apportioned balance of probabilities.

This bit, and the actual mechanics of how these loans work are what I am
curious about: I was thinking that how it works is that these line of
credit loans with seperate accounts mean I can draw money out (to use for
investments, or whatever) against the equity in the home, as I build up
the equity in the home. Then receive seperate interest (and transaction)
statements for the two seperate uses.

I just spoke to someone at Wizard Home Loans – a bit of confusion while I
tried to explain myself – still getting to grips with the terminology,
plus there is a bit of ambiguity with splitting/seperate accounts also
meaning using mixes of different loan products. They stated it doesn’t
work like that and I would be best off with a more conventional home loan
and a fixed 20K line of credit, and any “split account” is at an amount
fixed at the start of the loan and difficult to change afterwards.
Is there any loan that does match what I explained above? Or have I over
estimated the flexibility of current loan products on offer?

May 29, 2007

Line of Credit home loans

Filed under: loans — arandomperson @ 12:14 am

Well we have decided to get a house, or unit. As I still want to continue my messing with investments, a Line of Credit type home loan looks the go. I like the product from Wizard Wealth Power (Line of Credit) loan but the interest rate seems a tad high compared to what’s out there. We’ll see if they negotiate down.. otherwise it’s off to LoanAustralia..

Also that meet the parameters of having seperate acounts for keeping personal and investment use of the loan differentiated is the LoanAustralia Line of Credit. The difference in Comparison Rates is 7.77% – 7.16% = 0.61% between LoanAustralia and Wizard.

Also interesting to compare these two web pages:
http://www.loanaustralia.com.au/interest_rates.asp
http://www.aaamortgagefinance.com/interest_rates.asp

Hosted on the same class C network, owned by the same parent company, just differently themed and with a difference in the interest rates. Guess one is a site for signing people up at a higher interest rate if people don’t look around too hard.

Goodbye Etrade, Hello ANZ

Filed under: General — arandomperson @ 12:02 am

Well Etrade has been taken over by ANZ, so my Etrade shares just replaced by equivalent value of ANZ shares. A pity as I liked Etrade.. not as much of a fan of ANZ (I had a few ANZ accounts and the fees way too high, give me Bendigo Bank any day!).. but then as a shareholder there are surely worse shares to hold.

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