Hi All,
We are looking to purchase our first PPOR very soon (borrow 92-95%). We will live in it for 3 years, move overseas then either rent / sell it. We intend to invest in managed funds (monthly instalments) using the equity generated and minimise tax . We have received a multitude of advice from various 'professionals' on the best finance structure to achieve these goals and are now more confused than anything. The options we have been advised of include;
– Use a P&I loan with a debt recycling facility.
– Use a P&I loan with an offset account.
– Use an IO loan.
– Other??Can any of you gurus out there provide any input on the options above or what you would do if you were in this situation?
Any help you can provide would be greatly appreciated
ChristianWith a 95% loan you won't have any equity you can pull out to invest in managed funds. You will need to wait for capital growth and/or paying down the loan.
Since you may rent it, I would suggest an IO loan with a 100% offset account.
But, you will also be contributing money to invest into managed funds. I guess this is going to be frequent small amounts. It would be good if you could save up the money into the offset account, and then pay it off the loan and reborrow it to invest into managed funds. So you would need a loan with free redraw and an offset account.
Ideally, you would probably want to split your loan into a few different splits. Many lenders allow this at now cost. Depending on how much you want to invest each month, I would suggest one split of around $10k. Maybe another few splits around this amount too. This way you can pay into one of these small loans before reborrowing and keep the majority of your home loan separate. This will result in a better outcome at tax time – especially if you decide to keep the house.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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