Hi guys, well I am starting out doing some preliminary due diligence before I take the plunge into the IP market. I currently have a PPOR CMV around $450000 owing $280000 on an 80% LOC and I want to refinace my LOC to allow me to access equity in my home to take out a separate IO loan of approx $220000 – $240000 over an IP. Is there some easy way I can assess my current financial situation to see what I can afford to pay for an IP (as above is really only a guess) and how would you suggest that the loans be set up? Is it worth keeping the LOC or go Offset IO? Is it worth fixing interest in this volitile time? Thanks as I am a bit lost in terms of where to start.
Easiest way is to run your figures past a broker. He has software for all his lenders and can tell you who will lend the most or at the best rate – whatever is most important to you.
Use the LOC to source a 20% deposit plus costs and then buy an IP. Borrow 80% against the IP using a seperate facility. Usually I suggest a pro package which gives you a rate reduction plus no setup fees on the loan. Both loans will be deductible ie the LOC and the 80%.
Make all loans IO and pay all your funds into an offset account against your home.
How does this sound?
Ciao,
Thanks Simon soungs good but I have a few questions.
Regarding deductibility – just to confirm the 20% deposit plus costs from the LOC and the 80% loan on the IP will be tax deductible?
Won't paying the rental monies and my wages etc into my home loan make the other loans non deductible because the expense incurred is not offset against the rental income directly?
Thanks for your help mate
madproperty wrote:Thanks Simon soungs good but I have a few questions.
Regarding deductibility – just to confirm the 20% deposit plus costs from the LOC and the 80% loan on the IP will be tax deductible?
Won't paying the rental monies and my wages etc into my home loan make the other loans non deductible because the expense incurred is not offset against the rental income directly?
Thanks for your help mate
All loans used to buy the IP will be deductible. The 80% loan and the LOC (20%+) will both be deductible.
Do not pay anything into your home loan. Pay it all into an offset account against your home loan – draw funds from here to meet your interest bill each month.. This will reduce your non deductible debt.
You do not need to link rent to the IP loan. As long as you can show the loan was used to buy the property then it is deductible. It isn't any more complex than that.
Ciao,
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