Hi and welcome aboard :-)

My first comment is to structure your loans correctly – taking out the one large loan will be a nightmare for taxation purposes (some of the loan is deductible whilst some isn’t).

The bank will also try to cross collaterise your properties too – this is a big no no. That’s where they take both properties as security for one another.

Instead, you can tap into equity against your current IP to fund the deposit/costs on your new PPOR. This would need to be set up as a separate loan (so you can identify tax deductible debt – which is your current loan, from non-deductible debt – which is the equity release) – this also avoids cross coll.

You would then set up a third loan to cover the remaining balance against the new PPOR.

How much equity you release in your current IP comes down to a few factors – these include whether you paid LMI previously and the costs of LMI on the next property. A good broker/banker will able to run the numbers and work out the most cost effective option for you.

If the current IP loan isn’t already set up as interest only, it would be worthwhile sorting that out now. The reason is that there’s no need to pay down deductible debt (IP loan) when you have non-deductible debt (new PPOR).

In fact, if your disciplined with money, I’d be inclined to set up everything as IO with an offset linked to your PPOR loan. I wrote an article about the structure for API magazine, it’s available  here

Any other questions – ask away :-)

Cheers

Jamie

wCha wrote:

Hi Jamie, Thanks for your reply. Yes I thought one of the advantages of purchasing property through this structure was for the fact you may leverage your salary for loan applications multiple times. I guess this means that even purchasing through this structure will ultimately be limited to your salary income ( same as purchasing as an individual) I wonder if this is a mistake in the book or if its simply outdated now. Wil

No worries – you’re welcome.

Personally, I’m seeing less and less trust applications these days. They do have their place – but they’re not for everyone.

I’m not sure what’s written in the book – but there have been quite a few other new posters with the same question over the years.

Cheers

Jamie

Before rehab photos? I was expecting some different pics……then realised it was the overseas forum and “rehab” in the world of US property investing means something different :-)

Cheers

Jamie

Hi Wayne

No worries – go for it. Can you flick me a copy once you’re done?

I wouldn’t fix for 5 years. Personally, I think it can be a dangerous move – especially in the world of property investing.

Firstly, you’re at the mercy of ANZ credit policy for the next 5 years. So if you want to release equity – and they say no, you’ll have to pay high break costs to refinance to another lender.

It’s also hard to plan 5 years in advance. Your situation might change – and you could find yourself in a position where you need to sell or refinance. Either of those situations will result in high break costs.

I generally advise to not fix for longer than 3 years as it’s a period of time that you can plan for – you have a good idea of where you’ll be sitting 3 years from now…..but 5 years is just a bit too long.

Cheers

Jamie

Hi Andrew

Welcome aboard.

I doubt you’ll have any objections from this forum.

Cheers

Jamie

Hi Dan

1. Banker gets paid by the bank

2. Franchise owner prob just gets paid a commission from the lender- the structure would vary between franchises.

3. The valuation company they work for. However, the bank pays that company for their service.

Cheers

Jamie

Redwood wrote:

I’m struggling with the new web format….I have no idea what is going on.

You’ll get there :-)

It’s a little different – but it becomes easier.

Cheers

Jamie

Hiya

Yep – if the property has gone up in value, it’s possible to extract equity to use as the deposit on another property subject to the lenders policy.

If the property goes down in value, you won’t be able to extract equity. There’s usually no implications for the loan – especially if the valuation was ordered upfront and not part of a loan application.

Cheers

Jamie

Hi Frank

To be honest, I just read Pattaya and Home Loans and dismissed you as a spammer.

We get a lot of it around here – overseas posters who randomly drop by to spill some dribble about condos in Mumbai and place their links all over the website.

Apologies for placing your in the same category and welcome aboard.

Cheers

Jamie

Hi Azza

Welcome aboard.

I don’t quite understand the question.

Are you asking if you can use the money from the sale of your current home to buy an IP and also purchase land?

Cheers

Jamie