Investing in property

The WWP Cash-Flow Loan..

IMPORTANT: The info below describes how the Cash Flow Loan works, but keep in mind that you do pay a premium for it. However, we have created a pseudo cash flow loan to save you a lot of money. Properly structured, this strategy could be a very effective secret weapon for investors.

Heres how the standard Cash Flow Loan works:

Repayments from just 4.15% per annum (now 4.4% due to the last interest rate rise, the info below shows the
old rates but for the purpose of explaining how the cash flow loan works, we have left them there. Add .25 to the rates below)

Available to Investors and Owner Occupiers

Here is a fantastic New Loan that operates a little out of the box to come up with solutions to the biggest problem facing investors and that is CASHFLOW. This is especially the case in the first 5 years of an investment where traditionally the repayments on the loan are more than the rent and you as the owner have to fork out some cash out of your own resources to keep the investment. This can create unwanted financial stress and strain on your personal life and get you thinking that owning an investment property isn’t worth it. What then happens is that most people in this situation decide to sell the property and do not get to receive the major benefit from owning property which is long term capital growth.

This can all lead to an unpleasant investing experience. We now have a solution to this problem.

The Cash Flow Loan.

Typically you could use this loan in the following situations.

When you want to hold more property and not have to reduce the family's quality of life
Where rising interest rates are threatening to squeeze your cash flow
When it's a good time in the investing cycle to buy property yet you may be holding back from purchasing because of restricted cash flow
When you'd like to hold high growth properties but avoid or reduce negative cash flow
When you are considering selling assets because cash flow is tightening
Where you could use additional cash flow to fund business expansion, lifestyle choices or just take a holiday!

Key Features of The Cash Flow Loan

Capitalising part of the Interest for the first 5 years of the loan. What this means is that you only pay some of the interest payments when they are due each month and the balance gets added to your loan amount.

Available for both Full and Lo Doc customers.

The maximum amount you can borrow is 80% of the purchase price plus costs and then with increase over the 5 years to approx. 88% of the initial purchase price.

The loan is available for Investors and Owner Occupiers

As an investment property, the interest on the loan is fully tax deductible even though a portion of it is being capitalised.

Repayments are Interest only for the first 5 years.

How does it actually work?

Here is a table that shows what interest rate is payable up front and what is deferred.

	Interest	Interest
	Paid %	Capitalised
At Start	N/A	N/A
End Year 1	4.15%	4.24%
End Year 2	5.4%	3
End Year 3	6.4%	2
End Year 4	7.4%	1
End Year 5	7.9%	0

This table shows the full doc loan residential rate which is 8.4% and the lo doc rate is 8.9%
Customers with a good repayment history can get their interest rate reduced by 0.50% after 4 years.

Let’s have a look at how this would compare to a traditional loan.

We want to compare the Cash Flow Loan of $300,000 with a standard variable loan of $300,000 interest only at an assumed rate of interest of 7.4% which is about the current discounted professional pack rate.

	Traditional
	7.40%	Cash Flow
	Std Variable	Loan	Annual	Monthly
Difference	Repayment	Payment	Difference	Difference
	$	$	$	$
End Year 1	$22,200	$12,450	$9,750	$812.50
End Year 2	$22,200	$16,200	$6000	$500
End Year 3	$22,200	$19,200	$3000	$250
End Year 4	$22,200	$22,200	$0.00	0
End Year 5	$22,200	$23,700	-$1,500	-$125

It is worthwhile noting that in our experience an investment property that is initially costing more in repayments than it is generating in rent (negatively geared) under a traditional loan will become positively geared (rent more than paying for the holding costs such as loan repayments) after approximately 5 years.

You can see by the tables above that there is a big difference in repayment amounts especially in the first 2 years. You have the option to request a loan rollover (fees and conditions apply) after the first 2 years. The impact of this is to further extend the time that you can manage your cash flow and get the benefit of the major difference in cash flow for another 2 years.

Also, as mentioned above, customers with a good repayment history can get their interest rate reduced by 0.50% after 4 years.

Talk to us to find out how we can help you build your Property Investment Portfolio today.

Phone 1300 130 371.
Or contact us by email.