Refinancing to access equity in PPOR for IP deposit and PPOR improvements

Hi guys,

After reading Steve McKnight’s first book, I have been educating myself on property investing by reading more books, articles, course material and attending seminars. And last but not least, following discussions on the forum here. Thanks to all for sharing so much wisdom and experience, I hope I will be able to do the same in the future.

I feel I am now ready to get into the market and buy my first IP. I have plenty of equity in my PPOR, and I want to refinance in order to access this for (1) minor improvements to my PPOR , before I sell it off at the end of this year, and also for some other non-PPOR necessary expenses, (2) a deposit for an IP.

The broker, introduced by Steve during last week’s market update in Sydney, has proposed refinancing with a loan product that gives me an additional $265’000, enough for (1) and (2) above.

The problem I have with his loan product, is that there is one account that contains the full $265’000. In my understanding this means mixed purpose (i.e. partly non-IP related, partly IP related) of the loan, which will give me trouble with the ATO in regard to the deductibility of the IP part? I have not been able to get a satisfying answer from the broker, or possibly I have not formulated my concern correctly to him.

My understanding is that I would need 2 separate loan accounts, one non-IP related (to take care of (1) above) and another one IP-related (to take care of (2) above)? Or should this be 2 separate loans rather than 2 separate loan accounts belonging to the same homeloan?

Then when I actually buy an IP, I can use funds in the IP-related account as a deposit+costs, and arrange for another IP mortgage to access the remaining funds in order to avoid cross-securitisation.

Hopefully somebody can give me some insights here – your help is greatly appreciated.