Frequently Asked Questions
Please contact us if you can’t find the information you need
What are the benefits to me if the body corporate borrows?
You have the freedom to get important capital works done now. You save money compared with sinking funds and special levies. You only pay for what you use when you use it.
Why should we borrow rather than have a sinking fund or a special levy?
Borrowing will be cheaper for most body corporates and most owners, most of the time. Borrowing enables you to get important works done now rather than wait as you accumulate the money. You get the benefits of improved lifestyle and enhanced capital return now rather than having to wait. You can get all the works done in one go, rather than having to manage a staged project. You avoid potential legal liability for the property not being properly maintained. You avoid the financial distress caused by large special levies. You can be sure you have the funds to do the work rather than hoping that all owners can pay the special levy on time.
What happens if I sell my unit?
The owner at the time that a levy is due and payable has the obligation to pay that levy. If you sell your unit, you will be responsible for all levies due and payable up until the time of sale and then your purchaser will take over that responsibility.
How will strata borrowing affect the value of my unit?
The loan will be a liability of the corporation and so a purchaser should take into account the fact that there is a financial obligation. But there’s more to it than that. The work which is funded by the borrowing will usually increase the value of the unit, and you wouldn’t be contemplating doing the work if the increase in value was not going to exceed the cost. The next important point is that, as borrowing by the strata will probably be your cheapest source of funds (see our White Paper for a comparison of the costs of borrowing, sinking funds and special levies), borrowing to fund the work should add more value to your unit than the other two funding methods.
What are the main features of Lannock’s Strata Loans?
Flexibility and choice. You can draw as many advances as you need. You have the flexibility with each Advance to specify:
– Term of Advance (1 to 15 years)
– Interest Only Period (up to 2 years)
And, you can draw as many or as few advances as you need. You only pay for what you use, when you use it.
What will you lend us money for?
Lannock will lend for any work or project that the body corporate is allowed by legislation to conduct. This includes; repairs and maintenance, renovations, capital works, building defects, green projects, strata insurance, professional services, litigation, asset purchase, bridging finance, working capital – just ask us.
What security do you take? Is there a mortgage?
None. We make a loan to the body corporate. There are no mortgages, no liens, charges or caveats or any registration or impediment on the title of the common property or of any unit.
Do I have to give a personal guarantee?
No. Owners do not give a personal guarantee or any personal financial information.
How much does it cost?
The interest rate will depend on your loan requirements. Please contact us for a Funding Plan which includes indicative monthly repayments.
What fees do you charge?
Very few. We have an initial $600 approval fee but there are no line fees, facility fees, monthly or annual fees, commitment fees etc. The loan contract has a complete list of fees.
As an example, what is the difference between Reducing Balance Interest Rate and Flat Interest Rate charges for a $40,000 loan?
The following table compares a Reducing Balance Interest Rate vs a Flat Interest Rate on the same loan amount over the same loan term.
I’m on the committee. Do I have some special obligation if the body corporate borrows?
No. Being on the committee or being the person who signs the loan documents does not impose any extra obligation on you.
Do you have a minimum or maximum amount that you will lend?
No, please contact us to discuss your needs.
Do you require our strata manager or lawyer to certify that they have checked our bylaws?
No.
Can we pay the loan back early?
Yes. Generally there are no penalties for early repayment.
Why do Reducing Balance Interest Rates result in lower interest costs to borrowers than Flat Interest Rates ?
Reducing Balance Interest charges are calculated on the outstanding loan balance each month, resulting in decreasing interest payments over time. Flat Rate Interest charges are calculated on the initial loan amount and do not reduce throughout the loan term.
As an example, what is the difference between Reducing Balance Interest Rate and Flat Interest Rate charges for a $40,000 loan?
The following table compares a Reducing Balance Interest Rate vs a Flat Interest Rate on the same loan amount. The Reducing Balance Interest Rate is a 12-month term, while the Flat Interest Rate is the standard 10-month term.
Insurance Premium Funding usually has a term of 9 or 10 months. Lannock offers a 12-month term, providing cash flow benefits. However, the term of a Lannock loan is flexible, and you can choose a 9 or 10-month term if you prefer.
The Flat Interest Rate of 7.49% equals a Reducing Balance Interest Rate of 19.72%.
Alternatively, the Flat Interest Rate would need to be reduced to 4.39% to match the Reducing Balance Interest Rate of 8.00%.