Common Client FAQs - Lending and Strategy
Lending FAQs
Trust Structures and Borrowing Capacity
While not formal advice, trusts can help preserve borrowing capacity under specific conditions: - Trust must be positive cashflow - Requires accountant verification - Can help exceed personal borrowing limits - Offers tax distribution benefits - Provides asset protection Key considerations: - Higher land tax costs - Substantial accounting fees ($2-3k setup, $1-2k ongoing) - Limited lender options - Cannot negatively gear without income-producing assets
Fixed vs Variable Interest Rates
Variable rates generally offer more flexibility for investors: - Allows easier refinancing - No restrictions on extra repayments - Better for portfolio building Fixed rates provide: - Payment certainty - Protection against rate rises - May have limitations on extra repayments
Principal & Interest vs Interest-Only
Interest-Only with PPOR debt: - Better cashflow for PPOR debt reduction - Creates larger buffers - Higher interest rates - May affect serviceability Interest-Only without PPOR debt: - Improved cashflow - Better future serviceability with some lenders - Potential tax planning benefits - Higher interest rates
Commercial Lending
Key aspects: - Typically 70% LVR (up to 80% in some cases) - 15-25 year loan terms - Some banks offer residential cross-security - Different servicing requirements - Trust structures may help preserve borrowing capacity
Strategy FAQs
Pre-approval Process
Search process can begin without formal pre-approval: - Preliminary broker assessment is sufficient - Finance clauses provide protection - Banks often process faster with contracts - Allows for parallel processing of search and finance
Joint Loans and Individual Investing
Important considerations: - Joint and several liability applies - Only 50% of rental income counted for future borrowing - Some lenders offer 'Common debt reducer' loans - Trust structures can help manage debt visibility - Limited lender options for specialized arrangements
Business Owner Considerations
Lending assessment varies: - Case-by-case evaluation - Some lenders consider business profit - Others require increased personal income - Broker consultation recommended - Depends on business type and lender criteria
Overseas Relocation
Lending still possible for Australian citizens/PR: - Up to 80% LVR available - Refinance and pre-approvals possible - Employment tenure requirements vary - Company transfers may have different criteria
Note: This information is general in nature and should not be considered as financial advice. Always consult with qualified financial professionals for personalised advice.