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Saving Tax Through Successful Loan Structuring

One thing that is often over looked when attempting to improve general financial strength is the way that your loans have been structured. Effectively structuring your loans can mean gaining control over your mortgages and avoiding being overwhelmed by investment debt. Below are some quick tips that may be helpful in assessing your current financial situation in regard to your loans and mortgages. For further help and to advise you on the best steps to take for your individual circumstances, click here to arrange an appointment with a YML expert today.

  • Take advantage of the one opportunity you have to borrow the maximum and use an offset. Because increasing the loan later on means that the purpose of the additional funds can determine whether or not the loan is tax deductible or not, you are almost always better off taking the maximum loan to start with. That way, if you deposit your savings into a linked off-set account, your bank will only charge you interest for the remaining balance of your loan, while still allowing you to access your savings in the future.
  • Flexibility is key when it comes to managing loans, and choosing interest only over principal and interest allows you to preserve your loan principal at it’s original value which may be vital when it comes to future tax benefits. It also means reducing your financial commitments, minimising risk when it comes to unexpected changes of circumstances such as a temporary drop in income.
  • Always ensure you avoid giving the bank to much security. It is always better to hold a property’s title in your possession than in the banks. This has many advantages such as having total control over sale funds when it comes to selling a property without a mortgage, as opposed to banks making you use the profits to pay off other debts.
  • Diversify your lenders – This \allows one lender not to gain to much control over you, while also allowing you to maximise your borrowing capacity (within reasonable limits). As well as this, you will be able to maximise how much you can borrow against a property if you have relationships with two or more banks, as well avoiding refinancing due to having more than one lender to choose from.
  • Having a healthy level of tax detectable debt as an investor through your lifetime is a reality and not necessarily a bad thing. With accepting this fact, it is worth considering fixing your mortgage rates from time to time, and stagger their expiries. This ultimately gives you more flexibility and allows you to review your interest rate management more frequently.
  • Avoid cross-securitisation, where one loan uses more than one property as security. As you may have gathered from above, maximising your flexibility is a key aspect in successful loan structuring, and steering clear from cross-securitisation means more control over valuations and sale proceeds, which could both prove to be important factors in the future that you won’t want to cut off access to.

As said above, in order to put yourself in the best financial situation possible, it is highly recommend you consult with one of our experts at YML. Click here to contact us today and see what we can do for you and your loans to guide you towards success.

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