Case study: The dangers of poor mortgage advice


Seeking the advice of a finance specialist with a strong understanding of investment finance can be critical for property investors looking to progress in their investment journey. For active investors who have capital spread across multiple assets, in particular, ensuring the right loan structures and features are in place is essential to the expansion and success of their investment portfolio. Poorly structured loans can not only be detrimental to an investor’s long-term investment plan, but could also have critical implications on the management of their finances come tax time.

In our latest case study, we look at how the specialist mortgage brokers at Momentum Wealth helped an active investor who had received poor lending advice from a finance broker with a lack of experience in property investment.

The problem

Prior to enlisting the services of Momentum Wealth, the client had approached another finance broker to set up a loan that would be utilised for multiple investments. The client was an active investor in property, syndicates and other asset classes, and was looking for a lending solution that would allow for ease of management as well as flexibility should he wish to invest in further assets.

After briefing the finance broker on his needs, the broker set up a $500,000 loan against the investor’s home, with the loan amount to be used for multiple different investment assets. In doing so, however, the broker created a complex loan structure that would pose a number of difficulties for the investor and his accountant further down the line. Since the loan was not split into separate loans, this made it extremely difficult for the investor’s accountant to determine the proportion of interest and deductible debt associated with each investment, creating an unnecessarily lengthy process come tax time. This structure would also create additional complications should the investor wish to sell or add another investment to his portfolio, as this would require a further re-proportioning of interest and deductible debt.

The solution

Due to the difficulties encountered with the loan provided by his previous broker, the client approached Momentum Wealth’s finance team seeking an alternative lending solution. After speaking to the client about his financial situation and long-term investment plans, our mortgage broker advised that the client opt for an alternative loan structure that would allow him to create separate loan splits for each of his investments under one overarching limit.

As well as enabling the investor’s accountant to easily identify the interest purpose for each split, this structure granted the investor considerably more flexibility when it came to expanding his investment portfolio. Rather than reapplying to add a new investment to the loan each time he purchased an asset, the revised structure enabled the client to create a new split for additional investments, which he could do either online or by contacting our mortgage brokers. If the client now decides to sell an asset further down the line, he will also be able to amalgamate the remaining splits automatically rather than re-calculating the new proportions through a lengthy administrative process.

The importance of specialist mortgage advice

As an investor seeking to build your property portfolio, it’s important to find a mortgage broker that understands the right solutions to support your long-term investment goals. Unfortunately, not all lenders and brokers have the understanding and experience of the property market to do this, which can result in investor’s missing out on lending solutions that are better suited to their needs. In today’s volatile lending market, seeking the advice of a mortgage broker with an expert understanding in investment finance can be critical to maximising your success and wealth creation.

If you are seeking lending advice for a new investment venture or would like to organise a review of your current lending solutions, Momentum Wealth’s finance team would be happy to discuss your needs in an obligation-free consultation.


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