4 Keys to Loan Structure: Part 4

4) Minimising bank fees

Extra bank fees can include $200 for the valuation of each extra property, higher mortgage insurance premiums if applicable, extra settlement fees.

The extra costs for a simple top-up can range from $200 but can be well above this if you have a few properties. And, there’s more…

Yes, the list goes on, other negatives of cross securitization include:

• The lack of flexibility with regards to accessing extra funds,


• Loss of control of funds when selling a property cross-secured with another property that has dropped in value,


• Being tied to one lender if one or more properties have dropped in value,


• Reduction in negotiating power when a lender has control over multiple properties

Are there any positives? While the positives are generally in the favour of the bank, three reasons why cross securitization may be considered are:

• To reduce fees if a property is only to be held for a short time


• To obtain a higher discount by having larger loans


• To make a deal possible when an unusual property is being purchased

In these cases it is important to carefully way the positives and the negatives to ensure an informed decision is made.

4 Keys to Loan Structure: Part 3

3) Ensuring maximum tax effectiveness of your loans

When it comes to tax time having your loans correctly structured saves time, money and stress. If loans have not been correctly structured, calculating the deductible interest can be a nightmare.

Also, you may find out that you are paying down investment debt when you have no desire to do so!

Getting it right is critical, and making sure it’s right at the start is ideal.

4 Keys to Loan Structure: Part 2

2) Maximising your borrowing potential for future investment

Each lender has it’s own method of calculating the maximum loan they feel you can afford. Some of the areas where they vary include:

• The benchmark interest rate used - a higher rate ensures a bigger buffer but lowers the maximum borrowing limit
• The living allowance estimate
• Whether or not tax deductions received on investment loans are considered, and
• The rate used to calculate the repayments on debts with other lenders

The differences mean that a couple with two $50,000 incomes who wish to borrow for investment purposes could borrow $300,000 more with one lender than they could with another and there are a whole host of options in between.

This is a massive difference and can have a huge affect on investment potential. By selecting lenders carefully, splitting loans between lenders and using the lenders in a particular order your borrowing capacity can be maximized, which in turn will allow you to maximise investment opportunities.