Hi all,
Just looking for some basic advice on how I should structure a new loan for a new investment property that I plan on buying and moving into in a year or so. I understand that I should be be keeping my IP debt high and my PPOR low. However unsure of how this will work if I swap my ppor and IP.
Current PPOR value $500k with $320k owing. Do I take out the 80k equity and use it for the new IP? (that will eventually become my PPOR in a years time)
Or is there a better way?
Grateful for any advice.
Borrow any extra $80k from the PPOR as a separate split.
Use your cash as deposit to avoid LMI if possible
Borrow 80% of the new property, IO with 100% offsetQuickly convert the existing loant o IO with offset if you can.
Until you move keep all cash in the offset of the existing home.
Once you move take your cash with you to the new home and its offset.Use separate banks if you can.
And consider timing – when to move, considering land tax if applicable.
When you move out of the old one get a valuation done as this could be the new cost base.
No valuation needed for the new one when you move in, but keep a record of all expenses while you are living there as that can be used to reduce CGT when you sell.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
Thanks very much for the reply.
Some additional information for concideration.
Im not going to be able to avoid LMI. So can I borrow to say 88% of my current PPOR thus setting up a seperate split loan of:
500k x 88% = 440k (less 320k owing)
So $120kThis way I will be able to achive the new IP loan at 80%.
Then in a years time move into the IP and claim the LMI as taxable debt on the old PPOR?
Thanks again
Have you paid LMI on your current property before?
If so – then it’s likely to be more cost effective leveraging up to 88% against the existing property as the LMI costs shouldn’t be too high (just an adjustment to the premium you’ve already paid).
If you haven’t paid LMI previously – look at the difference in LMI costs when borrowing more than 80% against your current property compared to borrowing more than 80% against the purchase property.
I’d set all up as interest only – have an offset linked to the owner occ loan at the time.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Then in a years time move into the IP and claim the LMI as taxable debt on the old PPOR?
Thanks againYou can do that, but would the LMI be deductible? I don’t think so because it was incurred because you increased the loan to buy a new PPOR – a private expense.
However, You might be able to argue that the LMI relates to the whole loan and at least part of it will be deductible.
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
This is actually great thinking New Timer – well done.
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
I believe you would be able to claim a percentage of the LMI arguing it was incurred on the whole loan.
As it is normally claimable over 5 years with the first years proportional you still might be able to get 2-3 years worth out of it.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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