All Topics / Finance / Taking the Plunge!

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  • Profile photo of ellabooellaboo
    Member
    @ellaboo
    Join Date: 2004
    Post Count: 12
    August 26, 2009 - 12:16 am

    Hi everyone,

    Yes, I am finally taking the plunge after years of reading books and sitting on the side lines. I find these forums really inspirational and motivating, and certainly that anything is possible if you do your homework and take on a positive mindset. My situation is that have done a few DIY houses with husband who is a carpenter and have a PPOR which we now have about 500K equity. We love in a lovely coastal location which has seen great capital growth over past 10yrs which we have benefitted from. We have been looking for a property in this area for some time and have found a 70's house in need of some work but on 1550sqm and already on 2 titles. I have approached the bank and loaning the money is not an issue. I have been reading about LOC on the forums but not sure if I fully understand. Most recommend getting LOC against PPOR then channel all funds into offet which we already have in place with IO loan. What then happens to the LOC, I have read that some then use LOC to fund repayments,interest,insurance and ongoing costs etc and use rent to offset PPOR.Does the LOC capitalise or will there be monthly repayments for this as well as stand alone IP loan. Can someone please shed some light as I want to get everything set up correctly from day dot!.
    Cheers
    Penny

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    August 26, 2009 - 12:21 pm

    Hi Penny

    I would suggest you look at setting up a LOC on your current home. You can then use this as 20% deposit on the new house and borrow the remaining 80% as a separate loan.

    You can also pay expenses from the LOC – both initial purchase costs such as stamp duty, legals etc and on gong costs such as rates.

    Then you will free up more money to place into your offset account to save you even more non-deductible interest.

    Some LOCs allow the interest to be capitalised, others require the interest (at least) to be paid each month.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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