Have you received a PI offer from DVA? Here we give several examples of where CTWealth has taken the “Safe as Houses” approach with clients in the last 24 months.
For many Veterans the need to be able to provide security for themselves and their family after discharge becomes a driving force in their thinking. This is natural given renting leaves people vulnerable.
Housing/shelter is an essential need for people, so it will always be in demand, and historically has increased with inflation and demand. There is no reason to expect this to be any different moving forward.
PI offers can be taken as an ongoing pension, lump sum or a combination of the two (as stated in the DVA Permanent Impairment offer letter). We see this money as absolutely essential to Veterans and their families meaning its effective management is a top priority to our team here at CTWealth.
Here, we discuss why for so many of our clients, property investing is the ‘safe as houses’ best choice for them, and there are various ways we can make these offers work.
Case study 1: DVA PI Offer, DHOAS, Douglas, SRDP and Service Pension
We had a client who is a single individual with a property and a fixed rate mortgage. They are on MSBS Class A (no Douglas applied) and were anxious about the impact of the fixed mortgage coming off and going to variable. In this case a lump sum was not ideal.
Steps that our team put in place were:
- Applied for the DVA PI Pension
- Applied to MSBS for the client to be reviewed for the Douglas decision
- Recommended they engage with there bank to restructure their mortgage, optimising DHOAS to encompass the full mortgage
- Recommended that they apply for SRDP which resulted in a Service Pension
The catalyst for our engagement was DVA PI, but the solution was four steps. The outcome was the new variable mortgage was fully covered moving forward by applying these four enhancements.
Case study 2: DVA PI Offer, DHOAS, young family
We had a young couple with kids where there was an offer of DVA PI. The home had a mortgage with DHOAS optimised. The couple were conservative in their investment approach and had a preference to use property as their investment growth vehicle.
Steps that our team put in place were:
- We applied the PI payment to their mortgage to reduce non-deductible debt and to enhance their borrowing capacity while maintaining DHOAS
- Additional funds not required were put in a savings account in the name of the lowest income earner to reduce tax
- The couple’s first investment property was purchased within 3 months using a combination of new borrowings, and equity from the family home
- Once rent had increased on the first property, a second one was purchased using the same combination as above
The catalyst for our engagement was DVA PI. The solution recommended and implemented used the funds to set the family up in a tax effective and cashflow effective way using an investment approach that the family felt comfortable with.
The structure is almost as important as the way we use the funds.
Case study 3: DVA PI Offer, DHOAS eligible but not used
We had a couple with adult children, who were posted and living in DHA housing. They had several investment properties from prior postings, were DHOAS eligible but not yet used. Their intention at retirement is to move back to one of the current investment properties which has a mortgage. The couple wanted to use their DHOAS entitlement.
Outcomes of our financial advice were:
We applied the DVA PI payment to the property they intended to retire to, clearing its debt for future occupation
The couple purchased a home where they were posted to, optimising DHOAS ensuring its features were optimised for rental as opposed to a family home. Its value was 140% of the DVA PI payment, and it was 100% geared. This did require using equity in current properties.
On discharge, they left the new house and relocated to the prior investment property that now had no debt.
The catalyst for our engagement was DVA PI. The solution recommended and implemented used the funds to set the couple up for their future housing needs while getting the most out of there DHOAS.
The benefits of using property to build security and wealth
In every economic environment, there are cycles. Assets rise and fall. Housing is a commodity that is essential … it provides us and our family shelter and it will always be needed. With population growth and inflation, property will continue to increase in value over the decades.
It also gives us a pathway to generating wealth.
Most serving and discharged Veterans likely have a goal to own a home. Renting leaves you exposed to landlords not renewing your lease and uncertain rent increases. A paid-off home removes those risks and gives you a lower cost base so your savings and possibly an aged pension can be directed to essentials and lifestyle costs.
Cameron Teague from CTWealth is a Certified Financial Planner with 23 years experience including at CSC. Cameron is part of the ADF Financial Advice Referral Program.
We are committed to providing genuine non conflicted Personal Financial Advice that is billed directly to the DVA to help Veterans and their families make the best decision for them when a DVA offer of Permanent Impairment (PI) compensation has been received.
It is important to note that with all recommendations for our clients, we are non-conflicted. What that means, is that we don’t accept commissions in any shape and form. We assist our clients by liaising with their mortgage brokers where applicable, purely to assist the client. No commissions are received.
We offer a complimentary and obligation-free 10 minute phone discussion to explore likely advice needs prior to committing to an initial appointment.
Information discussed will be general advice only.
