Hi All,
Just wanted to say how wonderful this forum is, I’m glad there’s a free way to access useful info. posted all around. Love to read other people’s experiences
Anyway, I’m currently at a crossroads with increasing my little portfolio and just wanted to get people’s opinions about a loan structure I have in mind.
My situation is:
– Living with Parents
– Paying off one IP. The IP has:
– split P&I loan (variable and fixed)
– Offset account with money saved up for PPOR
– Equity > 50%What I have in mind is:
– At the end of the fixed term, change the loan to IO only
– Take out Equity Line of Credit up to 75% of the IP and use that to deposit for the next IP.As far as ATO is concerned, do you think I’m doing anything illegal buy borrowing to fund my next IP rather than using the money in my Offset account (which is sizable)? (This is on top of changing the current IP loan to IO only). My reason is that I want to save up to by my PPOR and not to avoid tax.
Also, what do you guys think of Werribee as a place to invest?
Welcome to the forum and I hope you enjoy your time with us.
There is nothing illegal about using equity over cash to fund your next deposit.
Certainly wouldnt be paying down the IP especially if you think one day you might buy a PPOR however i note you mention you will switch it to IO after the fixed rate ends. I would switching the variable part now.
Rather than use a LOC you could use an interest only equity loan as the rate might be slightly cheaper.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hey and welcome to the forum,
Looks like you already have your foot in the door when it comes to the property market, which is the hardest step. Have you got your IP positively cash flowed yet? 50% equity is pretty impressive, well done.
I agree with Richard, if you have a part variable home loan why not switch that part to IO immediately and save the excess money for your next IP/PPOR.
Ryan McLean | On Property
http://onproperty.com.au
Email MeThanks Richard/Ryan…still a long way to go.
Good to know its not illegal.
The variable part it 100% offset already so not paying any interest at all. Switching that part to IO will have no affect lol.
Thought about breaking the fixed loan but that will incur high penalty fees so ive decided to wait it out.
Richard – with IO equity loan, that will mean i’ll be applying for a fixed amount lump sum loan? If so, i’d rather get LOC as you can do IO repayments as well plus its more flexible as you can extend it as equity grows with having to take out another.
Also while im at it, are property mags n bank fees deductable? I may have missed those last year…
Hi,
I am also a new member in this forum site.
I just happened to join in today,
It is really so great to be here in this forum.
<br /:D” title=”>:D” class=”bbcode_smiley” />Nice to meet yopu guys.
Hi Alyna
Welcome to the forum. It's full of great people, all ready to help each other. Enjoy
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Investment Pupil
I think you have misunderstood the concept of an equity loan in regards to your following comments:
with IO equity loan, that will mean i'll be applying for a fixed amount lump sum loan? If so, i'd rather get LOC as you can do IO repayments as well plus its more flexible as you can extend it as equity grows with having to take out another.
Yes the amount applied for is a fixed amount but a line of credit has an upper limit.
Assume you could borrow $100,000 because this was the equity that was available you would draw down the funds on Settlement and pay it straight back into the loan. When you needed the funds for the deposit on your next IP all you would do is draw down the required amount to your Solicitor Trust etc and interest would be charged on the amount owing.
As the funds would only be used for investment you dont have the issue on the redraw as the purpose of the loan is for investment.
With a Line of Credit you still need to make an application to increase the limit once your equity increases and this is subject to normal credit assessment. There is no difference in that respect.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
:D” title=”>:D” class=”bbcode_smiley” />
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