Why is loan structuring important?
There are a number of factors that need to be considered when structuring an investment loan. The use of existing equity, asset ownership structuring and choosing the right type of loan can increase the tax effectiveness and make things more manageable when you are looking to invest again down the track.
Choosing the right structure
Different structures suit different investors. A line of credit secured against the family home is used by experienced investors for quick access to equity, an interest only loan is the most tax effective but a principle and interest loan may be a better option in some cases – or perhaps just setting up a loan with a 100% offset account.
The real value of effective loan structuring becomes apparent when your portfolio contains multiple assets and we work closely with experienced brokers to ensure that you have the right advice from the start, or work with you to rectify an ineffective structure.
The majority of investors will use the equity in an existing property to allow a subsequent purchase. When accessing this equity, there is option for a standalone or cross-collateralised loan structure. It is important to understand the implications of each to avoid future restrictions on buying or selling assets.
Cross collateralisation simply means that multiple properties are used to secure a loan by a certain lender. When this structure is employed, the lender is securing the aggregate of your loans with multiple assets as security.