Advice on setup

Hi Shock

Firstly welcome to the forum and hope you enjoy your time with is.

The response to your questions will depend on a few factors so i will answer each separately.

Q.Shall I leave the 100k on the offset account?
A. You want to keep the loans separate although finance 100% plus costs so it is merely of matter of how you structure this. If you feel you need to keep some cash for rainy days then I would look to take out maybe a 90% lvr on the land and construction and an equity loan on the PPOR. On the numbers you have given it is likely the equity loan will take you into LMI territory so you may decide to pay down the home loan portion with say $20K from the offset and then take out an equity loan for say $48,000.

$550,000 x 80% = $440,000 – $412,000 = $28,000
Reduce PPOR loan by say $20,000
$550,000 x 80% = $440,000 – $392,000 = $48,000 Sufficient to cover 10% deposit plus any associated costs.

If you can live with less cash then you might increase the amount you pay down on the PPOR loan and increase the equity loan so that you only need an 80% land and construction loan. Course reduced equity if you decide to repeat the exercise fairly quickly.

Q.Shall I use it to buy the land?
No no no no no. The interest on the investment loan (land and construction is Tax deductible) so you want to maximise your deductions. Interest on your PPOR is not Tax deductible so you want to minimise the intrest being charged.

Q. Do you guys go interest only or P and I?
A. Answer to this goes hand in hand with the previous question. Dont pay down your deductible debt whilst you have a non deductible interest bill. Interest only will be charged on the land and construction during the building phase but ensure that the loan stays this way post completion.

Probably a bit of fine tweaking and these numbers will work in your favour to meet your circumstances. It is something your Mortgage Broker should be able to offer advice and do the calculations for you on various scenarious.

Just make sure you structure the deal correctly to avoid the loans being crossed.

Any questions just ask.

Cheers

Yours in Finance

Course Shock apologies sometimes we use acronyn's and expect members to know what we are talking about.

Ask away.

Cheers

Yours in Finance