934 single mum in Tasmania, 40-year loans, pay off debt vs offset, holidays with friends + more

**Glen James** (0:06)
Today on the show, this is a wild bit of news that came out a few weeks ago. There is now a 40-year loan term, WTF, what is going on, we're going to talk about that. We're going to talk about what's happening out there in the property world, in this post-budget, put-to-bed environment. We've got a single mother who wants to buy an investment property for around 400K. We've got some people that have come in to about 70K, and they want to know, should they be paying off the personal loan or the car loan or both, or putting it on the offset account?
Semi-retiring, how do we do this when we've got a mortgage? Sounds like you need to maybe not semi-retire, but we'll address that and saving for holidays with friends.
We are joined today by Rachelle Kroon. Welcome Rachelle.

**Rachelle Kroon** (0:59)
Thank you.

**Glen James** (1:00)
And John Pidgeon. Welcome. Thank you, Glen. Hello Rachelle.

**Rachelle Kroon** (1:05)
Hello John.

**Glen James** (1:06)
These cats host the This Is Property Show on YouTube as well and on podcasts. But let's start with you Rachelle. Talk to us about this 40-year loan term, because I've got one or three things to say about it.

**Rachelle Kroon** (1:23)
Now look, it's been getting a lot of media attention the past week.
One thing I want to clarify that it is for investors. So it is a 40-year loan term for investors, and it has a 10-year interest only period with no reassessment period, which means as an investor, you can go and get a 40-year loan term. And for the first 10 years of that loan, you can just pay interest without having to do any sort of readjustment or refinance, which traditionally is a five-year period with most banks.

**Glen James** (1:55)
So the lender is AMP, right?

**Rachelle Kroon** (2:00)
Yeah. So that's the first lender. My hunch is that they won't be the last.

**Glen James** (2:05)
Yeah. Like so AMP, it's interesting as they're slowly reinventing themselves and rebuilding and all that, you know, less they're not doing financial advice anymore. They've still got the super investment products really heading into banking.
Maybe this is a way for them to, you know, get the name out there because they weren't a terrible lender.

**John Pidgeon** (2:29)
No, not at all.

**Glen James** (2:30)
They were always a good lender.

**Rachelle Kroon** (2:31)
And they've always been known to be an investor lender. They're one of the few that have a global limit that you can chop and change for investors, which is really effective for debt recycling. So they're wanting to keep their niche of investors open.

**Glen James** (2:44)
Right. So I'm just bringing it up here. The ANP Equity Flexi Loan. I mean, now in August, investment interest rate 6.54 or comparison 6.85.
Like that's not a terrible rate.

**Rachelle Kroon** (3:02)
It's not. So I would say it's about 0.2 above some other lenders. And you may see other lenders opening up.
I would say you'll see a lot more longer interest only terms.

**Glen James** (3:17)
So why would someone do this 40 years? Like, well, I think, and I want John's view on this, it's realistically a 10 year term. It's so because they're not assessing it for 10 years.

**Rachelle Kroon** (3:32)
So if you look before all of the, the Royal Commission and responsible lending, Westpac were actually the lender that had the best interest only term. So they used to do a third year loan term with a 15 year interest only period.
And investors would traditionally take 15 years. And 15 years is a pretty long way into your strategy.

**Glen James** (3:52)
And then they'd be able to hold a property for more than nine.

**Rachelle Kroon** (3:55)
And they'd reassess. But the whole time they held that investment property, they didn't have to reassess their income to be able to hold multiple investment properties. I've got clients that I did under the 15 year interest only period that are still there.
They've actually got about two years left before they roll off. So for an investor and their strategy, this has its place. My concern would be if they open this up to first home buyers.

**Glen James** (4:22)
Yeah. I mean, what's your view on it, Jonny, John Dogg?

**John Pidgeon** (4:26)
Can I go there first? Yes. Why would it be a concern for first home buyers?

**Rachelle Kroon** (4:30)
Well, if you think about, I guess, investors, the goal is generally you've got your own home, your own home loan that you're paying down.
And the strategy for a lot of investors is to pay their home loan down as fast as they can. And then to have investment properties that stay at the same limit. Generally, your goal is not to pay that debt down until your home loans paid off. And then you might move on to a strategy of principle and interest on investments. But I guess if we're going and starting to give 40 year loan terms to First Home Buyers, and I'm not saying it's a bad thing to do, I would just have, I would want more information before I gave an opinion on that, where I think for investors, it's a no-brainer.