Hi All,
Just after some guidance/ideas with my current situation, I have been in a bit of a holding pattern the last few years with new additions to the family and other work committments and am keen to get serious about more investing!
Quick run down of our situation:
Live in Melbourne
– Recently sold an investment property and got about $30 k profit which we paid off PPOR
– PPOR worth about $400k- now Owe $50 k
– Investment property worth $370k- Owe $250k (neutrally geared)
– LOC of $50k of which $40k is sitting there (I was using these funds to trade shares but recently sold most of them)
– Combined income of around $140k pa
All of these loans are cross collaterised against each other (which i couldnt avoid at the time)
I am now in a position to get back into another project and am looking at a property with some development potential and have been reading up as best I can to improve my knowledge in this area.
I obviously have some equity I would love to access in the IP to pay off my PPOR however as I understand, I cant simply extend the finance on it to pay my PPOR and claim that as a deduction.
My question is….
a) Is there any legal way to pay off my PPOR quicker using any of these loans,LOC, equity?
b) Will there be any obvious problems when it comes time to structure my loans to have the IP stand on its own without tying up the PPOR?
thanks
I wouldn't worry about your PPOR loan too much. $50,000 at 6% pa is only $3,000 in interest. Just keep utilising the offset account – all rents and incomes in there. Do you have one?
Take the opportunity now to uncross your loans as well and look at extending a LOC on your main residence. It could be possible to borrow from this to pay the expenses on your IP and keep your cash in your offset to pay off the PPOR loan quicker – but discuss with your tax advisor as the ATO are looking into this now.
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
You can't pay off the PPOR loan by using the LOC or a loan against the IP and then claim the interest on that amount.
Set up the facilities separately/standalone and if you are going to use equity in the PPOR to fund the next IP – make sure that that too is a separate facility.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi Harrison
I have to echo Terry's comment and would strongly suggest you make sure you set about ensuring your existing loans are structured correctly before you venture into your next project especially if it some form of development.
I can think of many a lender that will love to swallow up the equity in your PPOR at the expense of a development deal.
In cases like this when i work with clients who want to uncross their loans it is usually a matter of starting at the end and working backwards.
By this i mean we look to unravel the existing IP and have it standalone and then we look to work on the PPOR and look at an equity loan which gives the client access to funding for the IP or Development.
Then we work on a pre-approval depending on the size of the development.
Hate to say does take a few weeks to all get set properly but is well worth spending the time now to get iit right to go forward.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks for the advice guys,
Your opinions pretty much all make it clear that the best option will be to get the IP as a stand alone loan and access the equity in my PPOR as a LOC and use that to help fund the next project.
Thanks again,
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