Hi all,
New to this forum and would really love some good advice on how to set up our loans.
We have 3 properties all cross collateralised, which I now realise is not ideal! We love investing and want to continue in a much bigger way. Our current loans are as follows, PPOR $25,000 last bank valuation $500,000. IP 1 loan 230,000 last bank value $280,000. IP 2 loan $205,000 last bank valuation $195,000. IPs are interest only.
If we pay down approx $60,000 off the IP loans and pay the $25,000 owing on our PPOR my current bank will release our PPOR. My question is, should I take a line of credit for the maximum 80% against our PPOR (we have approval with suncorp to do this) and then use this for deposits on properties as we go along? Or should we just be borrowing the deposit against our PPOR each time or what other way should we be doing this?
Also I am currently working limited hrs but with 5 kids, (yes 5) I am considering not working for 12 months or so, which is why we thought maybe getting the line of credit sorted out now before going back to one main income might be the go.
Thanks for any imput, it's greatly appreciated
Get it while you can i think. Policies and circumstances change.
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
Certainly i would not be paying off $60,000 of your IP loans merely to uncross the securities and to be honest you dont need to reduce the debt by this amount or in fact any amount at all.
All you would need to is refinance the PPOR borrowing the required amount requested by Suncorp as separate Interest only loans pay them this to release the security. No debt reduction yet still claiming interest on the total loan albeit split over 2 lenders.
Then as Terry mentioned take the opportunity of applying for the maximum LOC as possible when you refinance and using this to cover your deposits and future acqusition costs.
Your Broker should be able to give you some options in regards to lenders that dont have an issue with LOC's for future investment.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Roz70 wrote:Hi all,
New to this forum and would really love some good advice on how to set up our loans.
We have 3 properties all cross collateralised, which I now realise is not ideal! We love investing and want to continue in a much bigger way. Our current loans are as follows, PPOR $25,000 last bank valuation $500,000. IP 1 loan 230,000 last bank value $280,000. IP 2 loan $205,000 last bank valuation $195,000. IPs are interest only.
If we pay down approx $60,000 off the IP loans and pay the $25,000 owing on our PPOR my current bank will release our PPOR. My question is, should I take a line of credit for the maximum 80% against our PPOR (we have approval with suncorp to do this) and then use this for deposits on properties as we go along?
Roz , this "as we go along "is it after you give up work ?
Yes you have a LOC but then if you are not working you will not be able to convince a bank that you can service any further loans using the deposit.
Why am I pointing this out to you is this is exactly how I set myself up but I haven't meet the servicing requirements for further loans as I have been looking after my two daughters for six years and am only starting to get back into some semblance of a career. So if you give up working any new loan will become difficult due to servicing.
Roz70 wrote:Or should we just be borrowing the deposit against our PPOR each time or what other way should we be doing this?
Also I am currently working limited hrs but with 5 kids, (yes 5) I am considering not working for 12 months or so, which is why we thought maybe getting the line of credit sorted out now before going back to one main income might be the go.
Thanks for any input, it's greatly appreciated
You may need to get a loan for the next IP sorted before you stop working but be careful with working out your cash flow factoring in no job income for 12 months to 2 years and also if higher interest rates and council rates will cause problems.
Also family payments and parenting payment are affected by negative gearing you may want to check into this also.
I am not going to go deeper into how it is affected as there is a post in heads up by me about payments.Also it becomes difficult to negative gear against your income when you reduce it or it becomes zero if your name is on the investment properties and loans..
Thanks a lot guys. I have saved your email address Richard and will be in touch some time down the track when we require further finance. (we need a good Mortgage broker)
I appreciate all your thought into our circumstances, as we go along is both now and later. My current income isn't enough to cause to much stress as my partner is the main bread winner at the moment and we do have other income, however once we hit serviceability issues, I guess every bit will help! (back to work for me then) I also always have a healthy buffer for emergencies as well as factoring in additional rate risesetc. Negative gearing shouldn't be an issue. All sound advice, thanks again and good luck with your investing.
Cheers
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