Ok, I just cant get it into my thick hard how it will work?
We have a 400k mortgage with 30k redraw. House is valued at 610k…..
So I want to use the equity to purchase our first IP BUT we are with myrate (ING) and getting answers are very funny. Calling them you cant even get through on the phone and have to leave messages. Obviously they never call back..aaah its driving me insane..anyway I digress.
We cant leave them for another 2 years as they will nearly take our firstborn or equivalent. How can I set it up. Do you have to pay a payout figure if you change from a simple variable account to a LOC but still stay with the same lender? What do you recommend we do to structure our finance to best get ahead….We obviously want to do Interest only on everything related to the IP
Please help as I am sooooo confused with the tax implications and finance structures considering we have to stay with the same lender…
Sammmeee
BTW I have found MYRATE service crap BUT..their online account functionality is brilliant.
Thats what you get for going with a non-bank lender – trouble.
You seem to be pretty much stuck, you also want to make sure that you don't dig yourself into a deeper hole with them.
You will need to set up a separate loan on that property, preferably a LOC. Take money from this and use it for deposit for the IP. Borrow the rest from another lender.
Changing your existing home to a LOC won't help I am afraid – you will be worse off with tax. You need two separate loans.
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
As Terry mentioned set up a separate interest only secured against your PPOR with My Rate for the deposit and acquisition costs and then look to take out a new Interest only loan secured against the IP you are borrowing.
Dont use the redraw facility in your current loan product or you will have issued when it comes to Tax time.
Richard Taylor | Australia's leading private lender
Ok, so if I set up an 80k interest only separate loan with our PPOR with MYRATE then go shopping for another bank for the rest.
So do you suggest I get the 80k now or should I get a broker out first and assume that I have the 80K…also would it then mean that this 80k will cost me another 5 years with MYRATE.. So once my original jail term is over I then have to wait until the 80k 5 years is up or do i just give them my firstborn? Is my firstborn tax deductible??
Really is it worth paying the payout figure on the 80k which is 1.0% of orgininal loan amount…$800
Actually I just checked the website and maybe its not as much to refinance as I first thought..
Year 1: 1.00% of the original loan amount
Year 2: 0.80%
Year 3: 0.60%
Year 4: 0.40%
Year 5: 0.20%
6+ years: 0.00%so on a 400k loan assuming they do their worst 400k x .8% = $3200 Do you think its worth it???
thanks soo much for your advice.
sammmeeeSammmeee, check with your accountant as this fee may be deductible if your purpose in refnancing is to set up for investing. It is still a large amount though, but it may be worth considering if you can do things properly and invest further.
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
Something a few people don’t consider.
You can go to a major bank (get an experienced lender) and borrow as follows;
80% interest only against the IP
20% plus costs with the major – against your existing property.You can get a 2nd mortgage put on the property you currently have which means the property has two mortgages registerred with the titles office. One to ING; and one to your new bank.
The new bank will top up behind your existing lender to 80%. when the couple of years is up the major bank simply refinances ING and takes the title – back to one mortgage.
I have done this many times for clients with fixed rates that don’t want to pay break costs. The fees are no different than a normal loan therefore don’t be scared it will cost more.
The process is a bit different e.g. Deed of priority is required however an experienced lender should know what to do and how to do it.
Rates for second mortgages with majors should be no different than normal loans.
Banker
Thanks Terry, Could I find out direct from ATO as Im tired of accountants that dont consider anything!!!!! The answer is always NO?
Thanks Banker,
Sounds complicated, is this something I could do through a broker or do I need to go direct?sammmeee
sammmeee
I think the ATO doesn't really provide that sort of advice. You can ring up and see what they say, but if you wanted a firm answer you would need to lodge a request for a private ruling.
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
Brokers have access to the same policies.
I would say it’s less complicated. You deal with one lender rather than two.
Both ways you finance 100% plus costs as two loans. 80% against the new property and 20% plus costs against the exising property.
The only difference is the new bank contacts ING and advises them they are placing a second mortgage on the property – you don’t need to deal with or speak to my rate / ING. They cannot refuse a second mortgage. The banks will organized deeds of priority etc between them.
Advantages;
1. fast (dont need the existing title released)
2. cheap – CBA is a great example. They don’t charge for the deed of priority.
3. Avoids ING break costs
4. one lender – e.g. Don’t have to apply to my rate / ING and another lender
5. only one hit on your credit reporty – not two!Banker
Banker – this sounds like a good way for sammmeee to proceed in this case. Avoids the break fees but still allows sammmeee to get away from them for further borrowings.
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
Agree. You could get stuck if your banker / broker is not up to speed. The banker / broker will also need to keep on top of getting ING to sign the deed on priority.
Sammmeee – what state are you in?
Im in WA.
I would say that Myrate(ING) would be very slow in doing anything, but I guess this is the job for the broker??
Awesome advice that will hopefully save me 3500 and more importantly let me out of jail.
Banker,
Does this then mean I have Cross-Collaterised my loans if the same bank has my deposit and IP loan? assuming I go the option of 2 mortgages on the PPOR.No. One against the purchase – standalone.
The other against the second mortgage.Hi Sammee,
I am so sorry to hear that have not been able to get hold of us. If you phone our head office directly on 1300 663 558 we will take care of your enquiry for you.
Banker,
Spoke to an experienced former NAB banker now mortgage broker. He spoke to a few banks about deed of priority and was told they will value the house at 80% to give the first mortgage a buffer (ANZ) however commbank didnt want a bar of it at all. Does that sound right?So it looks like i might just get a separate LOC with my good friends at myrate to get our full valuation
Nope. Did one recently with CBA. I think what ANZ is saying is MAX 80% LVR – 1st and 2nd combined.
Ok,
No the broker definately said ANZ will only take 80% of the valuation as they feel the orignal mortgage needs the buffer in case we default..ie if valued at 100k they will only take it to be valued at 80k and then only give 80% LVR on the 80k…
Mind you, I might just talk to a different broker. He tried to dissuade me “from going into that much debt”. I asked him if he had any investment properties and he laughed and said NO..i own my own home and go on lots of holidays thanks to a NAB payout. Then he asked where are you going to find houses under 300k. I told him where and he gave me a lecture on how he used to work in a bank in that area and used to do valuations based on how many beat up cars were left on the lawn….then said “aah I probably sound like a snob”…
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