Come across this site
http://www.finder.com.au/crown-money-management-rate-reducer…, that have 2.50% p.a. variable rate. anyone had tried them or knows them? It is very tempting and certainly worth the 600 bucks application fee if the rates are real
I like to ask OZBargain forum as you guys tends to be very critical of banks slugging money off honest citizen like me ^___^
Exactly…that's my fear here…
Seems interesting, definitely would appreciate some reviews!
Just so you know, this is their website and they appears to be based in Melbourne.
http://www.ratereducer.com.au/
It seems you need two loans to be able switch to them - one owner occupied and one investment. They give you 2.25-2.5% on the home loan and jack up the interest on the investment property (as it is tax deductible - negative gearing). You might be better off in the end provided you do the math. Lack of proper details regarding the deal on their website - I assume it is worked out on a case by case basis.
They give you 2.25-2.5% on the home loan and jack up the interest on the investment property (as it is tax deductible - negative gearing)
While this seems like a clever idea, I'm sure it'll run afoul of the ATO very soon. If it were legit tax strategy, all the banks would've been all over it years ago.
From their website - With the ATO product ruling PR2015/2, we’re able to rebalance your loan interest rates.
actually i think this is still legit. Think about it, I do split loans with NAB and NAB do charge me higher interest for my investment and my owner occupied lower. If that's how they re-balance out the loan, I'm OK with it. Just keep my loan interest rates low……..
I just don't want anything fishy with the lender themselves.
The change in interest rates between owner occupied and investment loans will raise interesting issues.
I haven't checked the website but i just had a quick look at the public ruling. It'll only provide protection if the interest rate on the investment loan is the same it would've been even if you didn't have a rate reducer private loan. The assumed facts is that the investment interest rate isnt affected by the home loan
However if in reality the interest rate is significantly higher to compensate for the reduced interest on the home loan, the PR won't provide protection and the ATO will certainly come after it.
Just had a look at the website…you know to be concerned when it tells you absolutely nothing about their product.
Wonder what their interest rate is on the investment loan.
I think it's a "Yes and No" answer. It's a loan and pretty much all it does, but it seems to be very specific about having a single owner occupied + single Investment property. This is pretty odd at this stage.
I won't discount them entirely for now, the rates are d@mned too tempting. I started a chat with them, and let see how this goes.
Let me know how you go! I'm really curious about this. Especially what the interest rate is on the investment loan
Just did a research on this topic and it seems there are whole heaps of brokers out there doing exactly this. From what I know is that, literally they are moving the rates from the Owner occupied Loan to the IP loan portion - with the IP loan portion having a larger split on the loan. Put it simply it is a split loan with IP owning the larger piece of the overall loan amount with higher interest rates while the Owner Occupied loans carries the lower interest rates.
More for Tax purposes i supposed as interests and other costs are tax deductible and at the same time the paying a little less on overall interests. Seems ATO is fine with it. Interesting.
I had filled out their forms yesterday but haven't get any updates from them tho. there are other brokers doing the same thing too.
Hi
Been busy lately but for those that are interested with this home loans. I have spoken to the guy already and worked out how their system works.
Basically it is a home loan account with unlimited redraw facility + a investment loan. It still a split loan sort of thing. The "method" if you like is not new but rather a money management strategy coupled with the rate tweaks i.e. very low rates on OO property and higher rates on the IP. It'll advised you to send all your salary to the home loan - with immidiately acts like a saving account. If you want money, just re-draw it. The difference is that if you put your money in the normal saving account, you won't be getting as much % in interest.
The interests on the OO will drop as the balance drops and hence your monthly interests drops (but your monthly salary deposits remains the same). With this way going, you are literally over-paying your normal repayments hence immediately slice a sizeable chunks off your principal - shortening the length of the loan repayments.
I do see some fear though, and this is not for everyone. If you have a larger loan on the OO property, this is not going to work. For this system to work, your investment property loan split needs to be larger than your owner occupied loan.
After speaking to that guy the other day, I think I'm sold.
just be weary though of 2 things:
however, and this is the biggy:
I did ask about this and what will happens is they'll have to switch it accordingly and make the interest rates changes. the low rates is only specifically for OO loan.
The interest rates is indeed one thing but if you look at the ATO instruments, this is specifically allowed to run and interestingly to only one company - a wholesale lender. My feeling is that ATO is trialing out the scheme and if this is successful might make this a mainstream thing. Technically speaking this is not affecting the Investment loan as it remains static pretty much. Once the OO is paid off, you repays the investment loan as usual loan.
But the scheme itself is selling two points
1. You put all monies into the loan. This is nothing new, all banks allows for it. The re-draw is unlimited with 0 fees.
2. Interest rates. this is something the bank will find difficulty in matching it as they have costs.
That two points above, really does accelerate the repayments. Low rates, 'large' repayments with low interests. In my case, it is expected to take me 10 years my loan as opposed to 28 years. 18 years of savings - i'm sold.
It looks like you gave your business to Crown Money Management. It's been 4 years already, how has it worked for you so far? I'm tempted to take their offer, but not sure if it is too good to be true?
This offer from Crown is a great idea but there are things you need to think about:
The future purpose for the owner occupied property?
The initial structure of your loan is very important because it will help you to maximise your returns and mitigate unnecessary risks. It's all about initial intentions and initial purposes!!!
The interest rate offer for the investment loan, fees for both loans, terms, how easy it will be to access your excess funds, etc.. Your need to work out your numbers! If you don't look into the overall numbers and only focus on the low interest rate of 2.25%, you might end up worth of.
Will the investment property be use as security for the owner occupied property as well? In my opinion, cross securiting assets is very risky and will hold you back from future borrowings.
I personally know this strategy works, but I am not using Crown as my lender.
It's best that you speak to a Financial Planner. They will be able answer your question.
Hope that helps.
This is the exact same deal offered under Mortgage Ezy brand through some brokerages. I have done 2-3 loans with them in the last year. Slightly slow. However, once approved my clients have had no issues and the online banking plus off-set feature with ATM withdrawals works good.
This particular product only works if cross- collateralised with an investment property (at a FAR higher rate). However, logically you want to have as little personal debt (2.5% p.a) compared to investment debts, as this debt is not tax-deductible. From memory the investment was 5.5% p.a. Weighted interest rate is around 4.2%. The products works good where you have both high owner occupier and investment debt. In turn allowing you to pay down your personal debt 'quicker' and maximising negative gearing/deductible debt. Few lenders have tried this in the past and ASIC/APRA have struck hard against it.
Also cross-collatoralisations can be a PAIN if you plan to draw out equity/sell any of the properties. I always try to avoid them,as it really only benefits the bank. Prefer to create 'investment' split on existing o/o security. This makes it super easy for the accountant to calculate interest and also proportion debt related to investment purposes.
Hope that helps.
Sam
Pro Finance Solutions
Hi Sam
Thanks for the input. I do have exact same view. Circumstance changes pretty quickly and if I wanted to sell of the property, the interest rates for my OO would just shoots out into space. That's my real concerns.
Hi All,
I have just signed up to Crown Money Management and will have my primary residence reduced to 2%. Part of their strategy is to get rid of your credit card, just like the Barefoot investor and have a budget so that an 'allowance' is deposited into your account for expenses. Essentially, you want to have as much money in your homeloan at any one time to reduce interest. The investment property will be dialled up a little in interest rate which will be claimable come tax time, all legitimate by the ATO. Also, if the RAB drop the cash rate, the interest rate will be lower on the primary residence…
Hi Rog6372, it looks like it's been a year already since you signed contract with them. How has it worked for you so far? Did they charge entry fee? Do they charge any monthly or anual fees? I hope you can share a bit of your experience. I'm still not sure if I should sign up with them. Do you recommend them?
Did not read the whole thing and have not heard of them prior. But this sounds like it falls in the "if it sounds too good to be true…" concept.