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“Why pay our tax debt with our mortgage?”
This is a question that most people have on their mind when the option is raised. Why pay tax debts with my mortgage? 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. When you look deeper however, there are some inherent issues to consider, which I will go into below.
- Each lender makes a submission to ASIC under their credit licence. When they do this, they detail 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. A personal loan might not be able to be classified as a tax debt loan for some lenders. This can affect their banking licence and that risk won’t be taken.
- Okay. Are there any personal loans available to pay tax debt instead of a tax debt mortgage? The short answer is yes. The longer answer is that lenders offering these loans have limited capacity to pay tax debts. They can often only lend small amounts. In that case, you could commonly enter under an arrangement with the ATO. If you do that, you will most likely be offered a better interest rate by the ATO. In that case, there would be no benefit in establishing a personal loan to pay tax debt.
- Who are the lenders that can provide a tax debt loan to meet your needs? These lenders are generally not mainstream lenders such as the big four banks. They have generally been around for greater than 15 years and offer some specialty finance solutions. Importantly, their ASIC licence allows them to lend for tax debt purposes. Each of these lenders have very different fees and interest rates for their tax debt mortgages they offer. This means to get the best loan, an assessment would need to be completed. This is how we can identify the most cost effective tax debt lender for our clients and confidently apply for the tax debt mortgage thats suits.
- I have a tax debt judgement – can I still obtain finance? Yes, we have lenders who can assist even with large tax debt judgements.
- Use of your mortgage to pay tax debt allows for greater capacity to pay large tax debts. Often an extra benefit is that a tax debt mortgage is stretched over a longer term. This means you would have a better chance of meeting the payments required in the short and long term.
- 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. This may be as a debt consolidation mortgage.
- Why don’t I apply for a loan for another purpose and use it to pay for the tax debt? A big reason is that this would be fraud. That has the very real possibility to put you into deeper trouble. We do not do this for clients. A tax debt would be noted in your tax returns. One of the common lender policies is that the applicants need to have no tax debts. 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 though, the effect of this would be that you could be closer to receiving a tax debt judgement. Your loan term prospects for refinancing back to a traditional lender may be hindered because of this judgement.
We specialise at helping clients with this type of finance. You can imagine already that inexperience by your broker will only compound your situation. So contact The Loansaver Network. We deal with these issues on a daily basis and can provide the advice and solutions you need.
Tax debt and the ATO are not to be taken lightly. The ATO does bankrupt individuals and liquidate businesses often. Therefor, you need to put yourself into action to pay urgent 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.