Hi Everyone
I am looking at a few different scenarios to purchase another IP. Currently have one and a PPoR.
My broker has told me that I can split the loan into two. The reason being I can borrow say $50k based on the equity in my PPoR without going over 80% LVR
So if purchasing a $400k property using a loan from a different bank, I would have essentially enough for a deposit on a 90% LVR loan, but up for LMI.
The question I have is would the LMI be payable on all the loans contributing to the deposit portion and the new IP. Or would I only be up for LMI on the new IP? Would the interest on both loans be claimable on tax?
I currently have my first IP on the market, which has a fair bit of equity in it, I am a bit conflicted, as I dont want to sell, but I do however want to reduce the amount of money I owe on my PPoR.
thanks for your help
Sorry, what I meant to say was
"The question I have is would the LMI be payable on all the loans contributing to the deposit portion and the new IP. Or would I only be up for LMI on the loan from the external bank to my current loans?"
If you are using a new lender to secure the 90% lend on the IP then LMI will only be payable on this loan assuming the Line of credit you have set up on your PPOR to fund the balance keeps the existing loan under 80%.
Interest deductability depends on the purpose of the funds so if the purpose of the line of credit was to funds the deposit for the IP then Yes the interest would be deductable.
Remember when you sell your IP you may incur CGT so i would make sure the reason for selling it is more than the fact that you need to reduce your non deductable interest.
I am suprised your Broker has not suggest ways in which to reduce the interest on your PPOR rather than running out and selling a IP then buying another one.
I must admit unless thru financial hardship i would never recommend to a client to sell their property merely to repay their PPOR debt. You could look to sell the property into Trust and obtain the same net result yet still retain ownership.
Richard Taylor | Australia's leading private lender
Thanks Richard.
Perhaps I should further explore the trust option. I am looking at increasing my portfolio over the next few years (as is everyone else!)
Kurt
Kurt
I agree most longer term investors feel we are entering a very good time to buy.
Richard Taylor | Australia's leading private lender
Hi Richard
I was interested in your comment about selling your PPOR to a trust. Is this deductible as I thought that the ATO was no longer allowing this. I am also looking at purchasing IP have approx 450K equity with loan of 350K on PPOR and would like to pay this off sooner than later. Currently is IO . I have contacted bank and have been given pre-approval of approx 300k + costs as partner S/E. What would be the best way to proceed as we already have a family trust in place for our business. Would appreciate your feedback or if anyone wants to share their thoughts would love to hear from you.
CheersWhatever you do, don't buy a property in the same trust that is running a business – otherwise if your business fails you could lose the property.
Selling your house to a trust is certainly possible. Trusts can deduct interest etc like an individual can, but you cannot negative gear against your own personal income. But if you have a business this shouldn't be a problem anyway.
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
Thanks Terry.
I am still an income earner but that is channelled through the family trust. Would we be better off initially just keeping our PPOR IO with offset account as to improve the cashflow and just keep new IP initially in our own names. I have been reading on the forums that some people get LOC via equity and then use this for deposits, insurance and onging running costs, short falls etc. The properties that I have been looking at are -tve geared, what would you recommend. ?
Regards Penny
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