Hi there

You can only claim interest on the balance of the loan when it turns into an IP.  In this case, it looks like it's going to  be $15k – which isn't ideal.

Here's an easy to understand article that I wrote last year on the topic.

Cheers

Jamie

Hi Keiko

Get in touch with the local council and get their advice in writing. Swimming pools = huge liability.

Cheers

Jamie

He’s not based in Melbourne and I’m not sure if he has anything to do with US purchases but I wouldn’t hesitate to use Terry W from this forum for any legal eagle stuff – he’s based in Syd.

Cheers

Jamie

It should be ok given that it's all IP related so all should be deductible.

I'd be a little concerned that your loan is cross collaterised with another property though – not the best way to structure loans, particularly if you plan on purchasing further investment properties.

Cheers

Jamie

I suspect Kris might have already copped a dose – 4 years is quite a while

Cheers

Jamie

I thought Sydney's second airport was going to be in my backyard

Cheers

Jamie

Hiya Kris

Always good to see another Canberran on the forum.

1. Yes and yes
2. No, it doesn't need to stay there for tax purposes. I wouldn't use "cash" for IP purposes though. Instead, I'd use your equity loan because the interest is deductible. Yes regarding the way interest is calculated.
3. Yes re the $160k – I'm not sure if your current lender will allow such a large cash-out. They will question it's usage – and will want to see that the purpose (the purchase of IPs) will service on their in-house calculator (Heritage has one of the least generous borrowing capacity calcs).
4. Yes
5. Yes – and no to the offset accounts. You only need ONE offset account, set-up against your non-deductible $240k PPOR loan.

Cheers

Jamie

Hi Kris

Yikes – 4 years of reading and this is your first post!

It looks like you've absorbed a lot of the info and have a sound understanding of how to structure the deal.

If your current PPOR is going to become an IP down the track, then please convert to IO with an offset now. There's no point further reducing this future deductible debt – your basically throwing away money if you continue to pay down the principle. Instead, continue to make the "would be" principle repayments into the offset account – this enables you to achieve the same result in the short-term and maximise the tax benefits in the longer term.

If you're planning on purchasing a few IPs early on, then I'd be inclined to tap into a large chunk of equity with your current lender (providing they allow for this – and it doesn't have a detrimental effect to your future borrowing capacity). This loan should be set up as a second facility (IO or LOC) and used exclusively for deposit/costs on your IPs.

You would then set-up separate, stand alone loans for the remaining portion for each IP.

At this point, lender selection is also important. I don't know what your borrowing capacity looks like but for new clients looking to purchase quite a few IPs, we generally start off with the least generous lenders (such as Heritage) and work our way up the line to the more generous lenders as serviceability becomes tighter.

Hope this helps.

Cheers

Jamie

No worries – I hope it all works out.

Cheers

Jamie

Hi Bella

If your current property is going to turn into an IP then switching to an interest only with offset product is a good idea.

If you are going to use the equity in your current property towards your next, then it's a good idea to access it now. I would set this equity release up as a second loan though – so you can distinguish your future tax deductible debt (current loan) from your future non-deductible debt (the equity release for the next PPOR).

There will be costs involved in refinancing – these generally include the outgoing lenders exit fee (despite what many think – there is still usually an admin charge for leaving, it's the Deferred Establishment Fees (DEF) which have been abolished), there's minor govt. fees and there may also be upfront fees with the new lender. If a broker wrote your other loan, they will be receiving a commission claw back because you're closing down the loan after only two months. You will need to check whether you'll be liable for paying back this claw back – if so, they would have provided you with written notification (should be via a credit quote).

There are offset products that don't incur an annual professional package charge – however, without knowing your particular situation, it's difficult to know whether they are suitable for you.

Cheers

Jamie