Options/Advice

If IP1 has been good to you why would you sell it?  The money you spent on stamp duty buying into it would be waste.d

Have you thought of refinancing your PPOR to access the equity in order to fund a deposit on IP2?

There is no harm in selling a property if you think that there is no scope for getting your money back on a negatively geared property through equity or rent. You don't want to keep on losing money year after year.

In the end you need to decide if by selling will make your next move more fruitful.

Cheers

Tom

Your PPOR has a bank value of $825k and it has only $550k of debt.

You could get a new bank to pay out the existing loan on your PPOR and start a brand new loan.

The end result would be that you'd end up with cold hard cash sitting in an equity account and you could withdraw it and

use it to purchase an investment property you see.

I figure it would look like this:

Bank valuation = $825k

Portion of the property value that they would want to leave  in place as an imaginary deposit = 20% = 0.2 * 825k = $165k.  With 20% of the place "paid off" if anything went wrong they wouldn't likely lose too much if they had to liquidate your asset (eg if you defaulted on your mortgage).

$825k-$165k = $660k

From this $660k they would spend $550k paying out the old bank loan

The remaining $110k (ie $660k – $550k) would be dumped into an equity release account (essentially an offset account against a mortgage that hasn't yet been drawn upon) and you could simply write a cheque from that

account to pay for a deposit and stamp duty on a subsequent IP.  You would pay no interest until you actually withdrew

the money, and then you would be able to claim the interest as a tax deduction since you would be using the money for

the purposes of acquiring an investment asset. 

Make sense?  So you've kind of fashioned $110k out of thin air.

If the brokers on here can explain it better or see any issues with my explanation or calcs, I have no beef with them improving on my spiel or correcting anything.

You can change it to a IO and then change it back to an P&I. From a tax deductibility perspective try paying off the car loan as soon as you can even ahead of the PPOR as this is bad debt (going IO temporarily may help this without affecting your current cashflow). 

If you are wanting to use existing equity to fund a new IP purchase I don't recommend a LOC but rather standard variable with a linked offset but just make sure its a separate a/c for tax purposes.

There is a few other ways to increase servicing (depending on the lender), you can fix a portion of your loan (I would recommend that you do this purely from a risk mitigation perspective and not purely to increase your servicing) and negative gearing benefits. You may not be able to borrow $500k but it may work out quite close that figure. 

Also you shouldn't sell your property because of finance as there is generally a solution. You should only consider selling a property if its costing you money and not going anywhere or a better opportunity comes up and you need the funds or of course you are in financial diffiiculty. 

AT, definitely explore an equity loan as the rate will certainly be cheaper than a LOC.

In regards to your current IP if you are thinking about selling it and the Tenant does not have a decent deposit remember you could always increase your cash flow (use the additional funds to pay down your PPOR) by looking to offer the property to him on Vendor Terms such as Installment Contract or Rent to Buy.

You obviously have a plan to stay put in your current PPOR and pay down the PPOR debt as quickly as possible.

I would look at possibly restructuring the PPOR loan and maybe fixing a portion of the loan as there will be a limit to how much you can pay back each month.

Make sure you are maximising your IP deductions and whatever you do i would make sure the loans are standalone as it sound like they are cross collateralised.

Even look at buying an IP with the option of selling it from day 1 on VF if you want to increase your income and pay down the PPOR. Course we haven't even explored the possibility of setting up a SMSF and purchasing property inside this structure.

Cheers

Yours in Finance 

Based on your initial post you are definitely cross securitised but you do have enough equity to unlink them. You can get your broker or banker to restructure them but you would be up for another set of LMI if the larger security was pushed into LMI territory but this is not the case so you should be fine.

Its best to set up standalone facilities for a lot of reasons but make sure that the equity you will use against the higher security is a standalone facility so the interest is not contaminated. 

Some of the disadvantages of cross securitising your loan are;

1. If you are in LMI territory then the LMI calculated will be on the higher loan and LVR amount rather than the individual and lower LVR and loan amount.

2 If you sell one of the securities then the bank may reassess your financial position and if both of you are unemployed at the time of assessment then this may cause issues.

3. If you sell your property in order to use the funds elsewhere then the bank may ask you to deposit the proceeds into the loan.

4. If the valuation on one of the securities come back lower then you don't have the flexibility of moving that specific security to another bank.

5. Generally speaking you lose the flexibility to moving or negotiating with the bank as they have 'tangled' your properties.

Regards

Shahin