Should I Use A Tax Debt Mortgage?

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“Why pay our tax debt with our mortgage?”

This is a question that most people have on their mind which I thought I’d put some information down regarding this. On face value it may seem better to pay your tax debt with a personal loan however there are some inherent issues with this which i will go into.

  1. Each lender makes a submission to ASIC under their credit licence detailing the type of lending they are offering. If a Tax Debt Mortgage is not listed and they deviate outside of their prescribed lending licence then the lender could have an ASIC regulatory issue which can affect their banking licence.
  2. Are there personal loans available to pay tax debt instead of a tax debt mortgage? The short answer is yes, the longer answer is that these lenders have limited capacity to pay tax debt ie they can lend only small amount which in that case you could enter under an arrangement with the ATO which will offer a better interest rate. Hence there would be no benefit in establishing a personal loan to pay tax debt.
  3. Who are the lenders that can provide the tax debt loan to meet your needs? These lenders are not mainstream lenders such as the big 4, however generally they have been around for greater than 15 years. Their ASIC licence allows them to lend for tax debt purposes. Each lender has very different fees and interest rates for their tax debt mortgages they offer hence an assessment would need to be completed to identify the best and most competitive tax debt lender and tax debt mortgage for your needs.
  4. I have a tax debt judgement – can I still obtain finance? Yes, we have lenders who can assist even with large judgements.
  5. Use of your mortgage to pay tax debt allows for greater capacity to pay large tax debt, and as the tax debt mortgage is stretched over a longer term you would have a better chance of meeting the payments.
  6. Do i need to keep my tax debt mortgage with this lender – no, usually the tax debt mortgage is a short term proposition, with a short to medium term goal of refinancing back to a traditional lender.
  7. Why don’t I apply for a loan for another purpose and use to pay for the tax debt – aside from this being fraud and put you into deeper trouble, the tax debt is noted in your tax returns and one of the other lender policies is that the applicants need to have no tax debt therefore an inexperienced banker may submit your loan (to improve his submission stats for his boss) and your loan would be declined down the track. The effect of this would be that you could be closer to receiving a tax debt judgement and your loan term prospects for refinancing back to a traditional lender may be hindered because of the judgement.

Tax debt and the ATO are not to be taken lightly. The ATO does bankrupt individuals and liquidate businesses weekly, hence you need to put yourself into action to pay tax debts as fast as practical. If you need any further information about using your mortgage to pay a tax debt, then contact Loan Saver Today on 1300 796 850.