Hi guys, have to move at the end of the year, with the current market I don’t want to sell my PPOR (which is paid off) at a loss (bought $400k, worth $350k) so I’ll rent it out and buy a new house. My budget is about $500k. Now I have $200k cash but I don’t want to put all of it towards the new house. Is it possible to put down $50k deposit, and after the loan is approved/i’ve bought the house I’ll make an extra repayment of $150k, will that $150k be liquid? ie redraw? Can I avoid mortgage insurance by using my current PPOR as guarantee? Thanks!
Offset accounts might be worth looking into. Money placed in this account will reduce the amount of interest on your loan and you can withdraw the funds as you wish. I did some calculations for my dad and he needed to have $7,000 kept in this account to break even with the fees charged by the bank.
Put a line of credit on your current PPR.
On the new house get a loan with 100% mortgage offset account.
Use $50000 from the LOC to fund 10% of Purchase price
Use $50000 from your cash to get the other 10% of deposit
This will cover your 20% deposit to avoid mortgage insurance.
Then put your remaining cash into the 100% offset account
Offset account is better than a redraw facility.
Its potentially possible for the ATO to assume your loan is paid off on a property if monies are paid into a redraw account then taken outWouldn’t use a LOC on your PPOR as the rates of interest are too high compared to a equity loan.
Depending on the long term objective there are a couple of loan structures you could use.
If the new property is to be used as a long term PPOR then maybe some clever debt re-cycling might achieve the eventual goal.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Borrow against the main residence as and use this 25% as deposit and costs and borrow 80% against the new property.
Even though you may live in the new property consider the tax consequences of if you were to move out so as to structure things in a way where all the interest would be deductible on the full purchase price plus costs.
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
There’s a few pathways you could go down depending on:
*whether the property would potentially be a PPOR or an IP one day
*what you would like to keep the funds liquid for
*what your plans are for future investing potentially
*where the current PPOR is
*borrowing capacity/personal scenarioYou could:
-release equity on your existing PPOR and use this to cover 100% of the deposit costs for the new PPOR
– use some equity and some cash towards new PPOR
– use all cash towards new PPOR and then release equity after settlementDepending on what your longer term plans are will dictate what is the best pathway. Whatever you do – do not provide your existing PPOR as additional security to guarantee/cross secure your purchase – this is incredibly poor structuring which can leave you stuck with the lender and having to follow what they decide they want you to do in the future with your funds instead of you being in control. A lot of people who work directly with banks/some lazy brokers get caught out with this and can’t always untangle the mess.
Best bet would be to call/email an investment focused finance broker who can listen to your plans and formulate a strategy which will fit not only your needs in terms of buying the next PPOR, but also what flows on from then.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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