All Topics / Finance / IP helping to pay for my PPOR

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  • Profile photo of wade anthonywade anthony
    Participant
    @wade-anthony
    Join Date: 2007
    Post Count: 53
    May 1, 2011 - 3:10 am

    Hi people,
    I was watching a youtube video from Jason Whitton talking about offsetting/redrawing loan accounts etc. He explains about using the rent from your IP to put towards the mortgage, but it has me puzzled as to then what pays off the IP (or does he just put the left over funds from the rent into the offset)? I have been contemplating doing this with my PPOR.
    Does anyone have any other secrets they are willing to share on the topic?

    Profile photo of Scott No MatesScott No Mates
    Participant
    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856
    May 1, 2011 - 3:36 am

    Watch out with what yo are doing. Taking money out of a loan account is ‘new’ borrowings & the purpose is paying off your ppor which is not deductible so the new borrowings are not deductible.
    Using funds from an offset account are treated the same as savings, your IP loan interest is charged on the outstanding balance.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    May 1, 2011 - 5:12 am

    There are many debt recycling strategies doing the rounds most of which involve you being charged a fee for some smoke and mirrors.

    I dont now who Jason Whitton is from a bar of soap but normally you would link the offset account to the PPOR and then have all of your income going into this account in order to reduce your interest being charged and then service the IP loan from the same account.

    A couple of variations are around using a LOC to service your expenditure such as Council Rates etc but the net end result is very similar.

    A decent property orientated mortgage broker will do the same for you for absolutely nothing.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    May 3, 2011 - 6:25 am

    I don’t know the strategy in the video, but under certain circumstances, it may be possible to use a LOC to service the interest on your investment loan (ie borrow to pay interest) and have the rent and all spare monies placed into a 100% offset account on your home loan.

    This strategy could help pay off your non-deductible debt in years. The more properties and equity you have the faster the process will become.

    But beware. The ATO has deemed some of these schemes as ‘schemes withh the dominant purpose being a tax deduction and denied the extra deductions. So you do need careful planning and possibly a private ruling.

    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

Viewing 4 posts - 1 through 4 (of 4 total)

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