Hi all,
This is my scenario:
I live in a unit which is fully paid off.
Borrowed money in 1998 for an IP (house). Still owe some money on it.
Borrowed a full amount for another IP (untit) a year ago.
My plan is to merge above two IP loans into one by refinancing.
I’m planning to sell the unit that I’m living in in about a year’s time and move into the house on which I might still own some money by then.
The proceeds of the sale would cover outstanding debt on the house and most of the IP (unit).
My question is: Will merging two IP loans now create difficulties over determining what part of the loan(s) will be treated as “paid of” later?
My objective is to pay off the house and move into it by selling the unit, so I have no “bad” debt.Many thanks
Milo
Hi Milo,
I’ve always been told never to take out global or balnket loans. Partly because you are linking the liability of one property to the other(s) and therefore all would, or could be controlled by the lender, and partly because of documentation etc if your circumstances change and you need to say, sell one of the properties or re-finance or whatever.In saying this I must admit, I have had blanket loans in the past for various reasons.
If you choose to merge your loans the amount relating to the IP can be apportioned for tax purposes. Your accountant can do this for you.
Cheers
JeffMilo,
If this is your plkan might I suggest you have splits on the loan which aportion directly to the existing loans. Then you can easily see where you are with each property.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Simon,
Could you please clarify what sort of “split” are you talking about here? What would it be called by the banks?
Thanks
Milo
It is called a split. Whereas it is one loan the bank will seperate it on a statement to show Split 1, Split 2 etc. These can all relate to different loans and even to personal borrowings to make things easier at tax time.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
What you are suggesting works for a time but we had 3 splits with anz and it just cost us fees without any real benifit. We then merged them all into 1 loan 7 props at a later stage.
Its all a personal thing but if you have diff loan with diff lenders you have greater flexibility down the track. IE sell one kill a loan, no delays to reval others etc. Your call.
DD
Don’t sweat the small stuff,and it’s all small stuff!!
Firstly you want to at the very least split the two loans into different accounts (one loan, two accounts) for tax purposes. Otherwise your accountant won’t like you very much. It also helps in that when you sell your first property, you can pay off the PPOR first, and leave any debt on your IP.
However, be careful in refinancing, about the terms of the loan, if you are going to pay off most of that loan in 1 year. Some banks will dock you a big fee if you pay off over a certain percentage of your loan within say 3 years (as an example).
Don’t be afraid to “split” because of costs, in most cases this shouldn’t cost you any extra. Make sure your lender/broker advises you of any costs involved in a split (i.e. extra monthly account fees or upfront cost per split).
Liz Wilson
Mortgage Lender
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