West Aussie
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I can’t tell if your joking?
that’s not how it works here, you sell your house you pay your loan.
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that’s not how it works here, you sell your house you pay your loan.
Donalex
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No joke...the HELOC (Home Equity Line of Credit) is actually a lien on the house. The settlement agent cuts a check to the HELOC bank.
The Z is not necessarily free as it comes out of your home sale proceeds, but it doesn't come out of your income.
Donalex
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Not really for some people. The rate can be lower, the interest is tax deductible, and it frees up accumulated cash for investment.
West Aussie
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Thats crazy!
West Aussie
Well-Known Member
I don’t see why…Interest rates are much lower than the financing or loans coming out of the bank…we have the money there in shares and actually we have it in our business as cash savings too, so we could if needed take a loan from our business ( which is actually still our money) , don't You worry we have looked at all options with our accountant to find the best option for us where we pay the least interest whilst our money in the other accounts and shares grow.
Of course, if you took the money out of your home equity loan and had no way to repay that, had no savings, no shares, no money in a business then your correct it’s risky ….but not if you actually have the cash on hand elsewhere but trying to maximise interest, dividends etc and worked out with a trained accountant the best way to capitalise on all of that…then no it’s not
The issue here is if you own a business, you first pay business tax which is very high, and then when you pay yourself you pay a high income tax on top of that so you get double taxed if you like. Now the more you earn the higher the tax bracket Is for your income tax.… so your better off paying yourself the award rate and leaving the rest in the business until needed where it will earn much higher interest
Again with the amount of shares we have the, dividends pays the same as 1 full days work every week for doing absolutely nothing other than them sitting in the share account
plenty of money ( well when I say plenty…we are not rolling in it or anything like that), just choosing the best way to maximise it
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Evolution
Well-Known Member
Ok I'm going to be honest here, I don't know much about loans since I rarely use them but..... I actually looked in to taking out a loan on my house since I can and the results were bad. Interest rate was ok but I forget what kind of loan it was called, but it was one where you pay most of the interest first. Not like a car payment where interest is the same every month. So if you have a 15 year loan, the first couple years you barely pay off the principle. Not sure if that's the kind of loan you 2 are talking about. If it is, you can see why that's bad, especially if you plan on paying it off early.
Mrs Aussie - sounds like you are on top of things regardless of loan type.
Mrs Aussie - sounds like you are on top of things regardless of loan type.
Evolution
Well-Known Member
How does equity have anything to do with it? More you have, the deeper in debt you can go? My house has doubled in value and I have no want to take money out cause of that.
Do you Aus people get better interest rates on taking out something on your house compared to a car loan? I can get a better car loan apr than house loan right now.
Yes, when people really want to do something, they do something even if it means.... happiness > the smart thing to do. Been through that before and will never go back.
West Aussie
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Nah…no idea how paying interest first would work…here you just pay it off usually in monthly instalments and you pay the interest on the loan monthly too…so if you pay the car off in a year instead of three your only paying the interest on the year the banks had it, if that makes sense.
It incentivises paying of your loan quicker
West Aussie
Well-Known Member
Each to their own…as I said loans work differently where you are, we have a qualified accountant as well as being pretty cluey ourselves
Cash is there if we need it.
We too payed our house loan off a long time ago…apart from the $200 we let sit there so we can borrow again without applying to the bank if we need.
I hardly see the difference between this type of loan and a finance arrangement …apart from being around 5% better off in interest than if you go through a dealer.
Its not painting things rosy when you have the means to buy outright..it’s about making your investments work for you so you get paid without working
Things work differently in the two countries obviously, here it makes sense to borrow this way and 90% of people do so…hardly anyone uses dealership finances
West Aussie
Well-Known Member
Home equity loans do not work like that.
You borrow a sum of money, once you pay it off you can use that same loan amount to borrow if you want, you don’t get a larger amount because your house has tripled (as mine has) in price, you can only borrow against the initial amount you borrowed. If you only borrowed 50k that’s all you can still borrow.
And yes interest rates in home loan is FAR cheaper than car financing, hardly anyone uses that as everyone knows it’s a rip off….
indeed it’s usually people that don’t have and never have home equity loans that do ..like young people
PS should also note that the loan is not sold with our houses here. You sell a house, you pay what’s left on your loan and then buy a new house with what’s left over….totally Different systems in place
Evolution
Well-Known Member
Well then, welcome to America haha. Not how it works over here. Say you buy a house and have a $2000 payment. The first year you pay $1800 in interest per month. The next year, you are down to 1700 a month in interest. 3rd year, 1600.... you get the point (obviously made up numbers). That really makes the % rate not even matter if paying something off fast while taking a loan out on the house.
West Aussie
Well-Known Member
Well if that’s how it worked here, I wouldn’t be doing it the way we are…that’s just ridiculous…how can they do that?
So there is no benefit for you guys to pay off a house 15years early other than getting it over with
that just sounds absolutely ridiculous to me