Advanced Debt Management© – A Perpetual Borrowing Model©
What is so unique about our advice method is that, we place the ‘tax’ in the centre of the enterprise. We then draw and adapt the debt management around it.
We employ algorithms and credit-structures to leverage on your personal circumstances to deliver segmentation and a more tailored debt management than the ‘blanketed’ bank middle market product.
Let us for instance consider the debt situation for Dr John Citizen:
John is a consultant obstetric physician. He earns approximately $300,000 p.a. from private work out of two specialised clinics and one day at the general hospital. John owns his family home with a mortgage of around $1.5 m
He has about $200,000 in savings and does not own any other investments or real estate property.
His accountant or his bank manager has advised him that the best way to manage his savings is to have an offset account linked to his home loan. Below graph demonstrates the cost of credit (associated interest and the cost of borrowing) on the loan.
Assumptions:
- An interest rate of 4.48% throughout the life of the loan
- Average offset account of $200,000
- Loan is structured as principal and interest repayment
- Extra repayment of $1,000 per month into the loan
Outcome:
Cost of Interest $619,795
Banking Fees $7,875
Total Cost of borrowing $627,670
Loan Term (payoff period) 21.5 Years
Below is a comparison presented on the above scenario with the same assumptions but managed under our advice:
- An interest rate of 4.48% throughout the life of the loan
- Average offset account of $200,000
- Loan is structured as principal and interest repayment
- John does not make the extra repayment of $1,000 per month into the loan
- Dr John Citizen does not own an investment property
Outcome:
Cost of Interest $214,879
Banking Fees $3,000
Total Cost of borrowing $217,879
Loan Term (payoff period) 8 Years
Balance of Savings $343,000
Cumulative Tax Savings $32,300 (approx.)
The above scenario demonstrates a small sample of the distinctive approach that we take in administering your biggest liability, the home loan debt. [contact us]
