PROPERTY MORTGAGE SAUSAGE SIZZLED IN @$#*

Ever been told that you can fire proof your home from someone trying to sell you property and all the other associated products. These products will rang from advice on were to purchase, agents commission, advertising, home insurance, life insurance, mortgage insurance, the actual mortgage, how to structure the purchase, valuations, depreciation reports, body corporate, property management, property maintenance, gardening, conveyancing, tax returns, wills and what else they can think of to make money out of you.

The latest sausage I have seen, is sizzled as Fire Proofing your Home. This is when the loan you take out to purchase the investment property does not require your house to be used as security, it is also described as a low doc loan. The promoter will make more money out of this type of loan as the interest rate and establishment fees on these loans are higher than normal loans. This sounds like good advice as you are prepared to pay more money for the protection so how can it be a sizzle. On the surface it is good advice however where the sausage starts to loose its appeal is in the detail. You see the lender, as they are not in the business of losing money, will more than likely have you sign a personal guarantee for the loan. A personal guarantee will mean that if the proceeds from the sale of the investment property does not repay all the loan, anything else you own will be used to pay it. So basically you will have agreed to pay a higher interest rate and higher establishment fees for no real protection.

When you also factor in all the taxes that the state and local governments charge it makes you wonder how an investor makes any money at all. We wont if the never ending property boom stops, e.g japan.

PERSONAL PROPERTY SECURITIES REFORM AND RETENTIONS OF TITLE

The Personal Property Securities ACT 2009 is expected to commence from May 2011 and if you are currently using RETENTION OF TITLE CLAUSES you will have to change what you do. The ACT deems a retention of title as a security interest. This means that you will not be able to take possession of the goods should the purchaser default on your agreement with them. To over come this you will have to register your interest on the Personal Property Securities Register and make sure your agreements are worded correctly.

There are also a number of other areas of your affairs that will need to be reviewed to continue your existing risk minimisation strategy's. In particular if you lease goods to related entities and have fixed and floating charges over assets to protect inter entity loans. We will be talking to you over the coming months with what you will be required to do, however should you in the mean time require assistance please contact DHM Partners.

BANKS SHOULD JUST STICK TO LENDING MONEY

I have just had another example of the banks trying to move into advice giving instead of doing what we want them to do in lend us money via the most appropriate loan product. This time it was the NATIONAL AUSTRALIA BANK (NAB) and they are trying to sell insurance to their clients. So if the NAB suggest to you that you should talk to their insurance broker who is not a local remember the following:

1. they will quote you a cheaper rate this year and then get you the following year
2. the profit on the premium is leaving the town
3. if you have to claim you will not be dealing with a local,
4. as you are not dealing with a local it is likely the claim will take longer so think about what detriment this could cause your business, and
5. do you really want your bank having more control over you.

If this does happen and they suggest you can get it cheaper you need to say to them "thanks you have me thinking about cutting costs and can you have the details of your loan as you would like to take it to another bank and see if you can get a better deal".