The Mortgage Down product pairs investment and home loans to reduce the interest on the home loan
MPA talks to Neil Brett of CSC home loans about the Mortgage Down product, which pairs investment and home loans to reduce the interest on the home loan
What sort of client is this product designed for?
The Mortgage Down Product is designed to pay off your home sooner. The client /borrower needs to have a home loan and an investment loan to qualify. The P&I home loan and the Interest only investment loan are then entered into the Mortgage Down calculator to achieve the lowest possible rate on the home loan.
This is an ideal product for borrowers wishing to refinance their own home and investment loan. It is ideal for the homeowner who is looking to buy and investment property who can refinance his total borrowings to achieve a lower home loan rate.
The interest savings and the reduction in the mortgage term is achieved by keeping the repayments the same as the previous home loan.
Why haven’t we seen products like this recently?
There has been very little innovation in the lending market since the Low Doc loan of the early 2000’s Earlier stoushes with the ATO in the 90’s has had these types of loans go our of favour. This is the first Loan which has a tax ruling allowing the borrower to decrease the P&I home loan rate while increasing the tax deductible investment interest rate.
Are there any limits on a client’s ability to increase or decrease interest rates?
The Interest rate calculations are governed by the ATO Public Ruling and allow the floor rate on the P&I home loan to be 0.5% above the RBA rate. (Currently 2.5%. )The ceiling rate on the investment interest only loan is 3.5% above the RBA rate (currently 5.5%.) These are the 2 paramaters set by the ATO. Using the Mortgage Down calculator most borrowers loans will fall between those 2 rates see example
Does the success of this product depend heavily on current rules on negative gearing?
The current rules on negative gearing allow tax deduction on your loan if it is for income producing purposes. The removal of neg gearing would impact this product in the same way as any other borrowings for investment. The Mortgage Down product does not depend on the current rules of negative gearing.The current environment does give the Mortgage Down Borrower more flexibility over his total borrowings
How can a broker use this product to provide a better client experience?
The broker or other financial professional can provide Mortgage Down as a financial tool in the wealth creation process.The client can pay off his home sooner or create an off set account with greater value and faster than a normal home loan. This gives the client more options to their financial situation The loans are not cross colateralised and offer the borrow a more flexible loan experience. In our experience Not only does the client get a better experience but the broker now writes two loans and experiences many referrals because of the Mortgage Down uniqueness.
Find out more about Mortgage Down on http://cschl.com.au/
What sort of client is this product designed for?
The Mortgage Down Product is designed to pay off your home sooner. The client /borrower needs to have a home loan and an investment loan to qualify. The P&I home loan and the Interest only investment loan are then entered into the Mortgage Down calculator to achieve the lowest possible rate on the home loan.
This is an ideal product for borrowers wishing to refinance their own home and investment loan. It is ideal for the homeowner who is looking to buy and investment property who can refinance his total borrowings to achieve a lower home loan rate.
The interest savings and the reduction in the mortgage term is achieved by keeping the repayments the same as the previous home loan.
Why haven’t we seen products like this recently?
There has been very little innovation in the lending market since the Low Doc loan of the early 2000’s Earlier stoushes with the ATO in the 90’s has had these types of loans go our of favour. This is the first Loan which has a tax ruling allowing the borrower to decrease the P&I home loan rate while increasing the tax deductible investment interest rate.
Are there any limits on a client’s ability to increase or decrease interest rates?
The Interest rate calculations are governed by the ATO Public Ruling and allow the floor rate on the P&I home loan to be 0.5% above the RBA rate. (Currently 2.5%. )The ceiling rate on the investment interest only loan is 3.5% above the RBA rate (currently 5.5%.) These are the 2 paramaters set by the ATO. Using the Mortgage Down calculator most borrowers loans will fall between those 2 rates see example
Does the success of this product depend heavily on current rules on negative gearing?
The current rules on negative gearing allow tax deduction on your loan if it is for income producing purposes. The removal of neg gearing would impact this product in the same way as any other borrowings for investment. The Mortgage Down product does not depend on the current rules of negative gearing.The current environment does give the Mortgage Down Borrower more flexibility over his total borrowings
How can a broker use this product to provide a better client experience?
The broker or other financial professional can provide Mortgage Down as a financial tool in the wealth creation process.The client can pay off his home sooner or create an off set account with greater value and faster than a normal home loan. This gives the client more options to their financial situation The loans are not cross colateralised and offer the borrow a more flexible loan experience. In our experience Not only does the client get a better experience but the broker now writes two loans and experiences many referrals because of the Mortgage Down uniqueness.
Find out more about Mortgage Down on http://cschl.com.au/
