Secured loan
What should be entered as a Secured loan
The following should be added as a Secured Loan:
Home mortgages
Investment Property loans
Margin loans on shares (SDS only)
Secured Loans can be for directly owned assets or assets in an SMSF or Trust.
A secured loan can use the equity in a family home or property to fund the purchase of another asset.
Do not enter under secured loans:
Car loans - Even if the car loan is secured by the car, this should be entered as an Unsecured loan
How to add a Secured loan
How to add existing loans
Existing loans should be added at the Current situation step with the asset that they financing:
If the asset is directly owned, then add the loan at the Current situation > Assets & Loans step.
If the asset is owned by an SMSF or Trust, then:
At the Super & Trusts step, add the SMSF or Trust
Add the asset
Add the secured loan
How to add new loans
Ensure that, first, the asset that the loan is financing has been added in the appropriate place:
If it is an existing asset, add it under the Current situation
If it is a proposed asset, add it under the Cash flows & goals step
If the asset is directly owned, you can add the loan at the Review assets & loans step
If the asset is owned by an SMSF, you can add the loan at the Review super funds step
If the asset is owned by a Trust, you can add the loan at the Review Trusts step
Then at the Cash flows & Goals step, find the asset that is financing the loan, and under the asset, click the +Add new loan financing (asset) button
Note: if you cannot find the button or it is marked with a rocket icon or has a message when you add the loan then it is possible that the adding a loan to that asset is not possible in the standard modelling
Modelling options for Secured loan
Let Pathfinder calculate how much to borrow for a new investment property or family home | On a secured loan, for the ‘Borrowing options’ field, if you choose the Robot button:
Then you are letting Pathfinder calculate the amount to borrow. It will keep to the maximum of: (Loan to Value Ratio (LVR) of the property) x (the projected value of the property at the time of purchase) For example, if the Loan to Value Ratio is given as 80% and the Value of the property at the time of purchase is $500,000, then the maximum amount that can be borrowed is $400,000 (i.e. $500,000 x 80%). The amount borrowed will not exceed the LVR, but it could be less if the individuals can afford to make a larger deposit and it would maximise their wealth under the given assumptions. If you would like to set an exact amount to borrow, see the next option. |
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Setting exact borrowings for a new investment property of family home | Instead of letting Pathfinder calculate the borrowed amount (as above), you can specify an exact amount as a percentage of the property (up to the LVR) at the time of purchase. In the loan’s ‘Goals’ section, for the Borrowing options field, select ‘Set exact borrowings as % of financed asset’, which will display the field ‘Exact borrowings (as % of financed asset)’. This allows you to borrow an amount that may not be mathematically optimal, but is more practical for some strategies: For example, you may want to borrow exactly 80%, despite having enough cash for an outright purchase. As well, if the property has multiple loans, you can specify your desired borrowings for each. Also note:
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Controlling loan repayments | On the Cashflows & Goals > Review Assets & Loans step, for each loan you will see a field called ‘Repayment options’ which will let you control loan repayments (e.g. only make minimum repayments, pay off loan by a particular year). |
Paying off a loan early and keeping the same repayment every year | If you choose to pay off a loan by a particular year, Pathfinder will optimise repayments, so the repayments may vary from year to year. If you would like to spread the repayments evenly across a set number of years, then:
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Set tax status of loan repayments | By default, the tax status of the loan is determined by what asset it is secured by:
You can override these defaults by editing the 'Percentage deductible' field on the Secured Loan. |
Change the interest rate in future years | To model the interest rate as increasing or decreasing in future years:
For more, see How to increase or decrease a value in the series builder |
Run a 'stress test' scenario with higher interest rates | If you would like to 'stress test' a scenario by checking what would happen if interest rates increased, you can:
In the results:
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Additional help topics |
Results for Secured Loan
See Secured Loan (mortgage) results
Related items
Assets that can have secured loans:
Strategy Development Service (SDS) and Background adjustment options
If the case includes complex analysis that you are not able to do in Pathfinder yourself, Optimo Support may be able to do some background adjustments to help you get the results you need. Depending on the complexity, this may be included as part of the standard support or additional charges may apply. For more details, please see Modelling outside the scope of Pathfinders' standard modelling.
Some examples of things that are outside the scope of Pathfinder's modelling and how Optimo support can help, are listed below:
Adjustment | Details | Information required by Optimo Support | Examples where additional charges may apply |
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Specify an exact amount to borrow | You are able to set exact borrowings on loans used to purchase an Investment property or Family home. However, for other situations, the amount of a loan obtained for investments, such as properties and shares/managed funds, is optimized based on the specified ‘LVR’ (max 100%) and ‘Maximum % of asset funded by loans’. As such, Pathfinder can sometimes borrow less than you expected, if the individuals have other available funds they can use for the purchase. |
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Borrow against an existing asset for a line of credit or as a home equity loan (unless it’s for financing another property, home or shares/managed fund in the case) | If you are borrowing against a property to fund another property, home or shares/managed fund, this is possible for you to do yourself. Please see How to enter a loan that is secured by one asset and financing another asset (e.g. home equity loan) If you want to borrowing against an existing asset to fund renovations or other lifestyle choice, then Pathfinder may not borrow enough or too much. |
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Refinance a loan | If you add a new loan that is secured by and financing an existing asset, Pathfinder may not borrow any funds against it. | You need to add:
Please email support and tell them:
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Borrowing for shares (margin loans) | Pathfinder may borrow more or less than what you require, and it may not be possible for you to control the borrowing amount in the interface. | You need to add and fill in as much as you can:
Please tell support:
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Debt recycling |
It may be possible for you to model the strategy yourself, however if you require something like extra mortage repayments should be equal to the amount borrowed on a loan, and the amount borrowed should be invested in a managed fund, then this will require a background adjustment. | If the case has a lot of loans or assets to adjust, or there are complicated contraints. |