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  • Profile photo of newday7newday7
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    August 16, 2010 - 11:53 pm

    Thanks Terry. I now understand this more.

    As I don't know the financial state of the person selling the property (except that she has moved interstate), I suppose, protecting my interest is important ……..somewhat like buying "insurance" for the "unexpected"?  My conveyancer is charging $220 for me to lodge.

    newday7

    Profile photo of newday7newday7
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    August 16, 2010 - 4:39 am

    Thanks heaps for the links, it is certainly very informative. I'd definitely consider lodging a caveat.

    Everyday I learn something new!

    Profile photo of newday7newday7
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    August 10, 2010 - 2:05 pm

    Thanks Terry. Will do.

    newday7

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    August 10, 2010 - 1:08 pm
    Terryw wrote:
    say you have loan on your home and a  loan on your IP. Your IP is rented and you have equity in your home and the ability to service and qualify for a LOC.

    What you could do, after careful structuring advice, is this:
    1. Put all rent from the IP into your 100% offset account attached to your home loan.
    2. Pay the interest on the IP loan with money borrowed from the LOC.
    3. pay all other expenses associated with the IP by borrowing from the LOC.

    The result is this:
    A. The interest on your home loan rapidly decreases because all rents are going into offset
    B. Cash you would have used to pay rates etc is freed up to go in the offset resulting in even more interest savings on the PPOR loan.
    C. Interest on your IP increases because you are borrowing to pay investment expenses.
    D. C results in increased tax deductions
    E. Get a tax variation so you save tax weekly and this will result in even more interest savings on your PPOR loan.

    Then repeat the process. The more investments you own the quicker you can pay off your PPOR.

    You must be very careful how this is set up or the ATO could disallow it.

    Hi Terry,

    I've just had this similar structure setup recently. I didn't think to borrow from my LOC to pay the IP loan interest until I read this forum and the api mag this month. I was just going to pay the IP loan interest from my offset account. By paying the IP loan interest from LOC is definitely going to speed things up with clearing non-deductible interest. 

    So my question is, when would I then start to reduce the loan in my LOC seeing that it will slowly rise & I pay only the minimum or IO? When I have finished paying off my PPOR? Appreciate your help.

    Thanks.
    newday7 

    Profile photo of newday7newday7
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    August 2, 2010 - 10:51 am
    Banker wrote:


    RISK IF YOU CROSS

    If you sell your PPOR and the investment property has reduced in value to 280k. The bank may ask you to reduce the loan to 80% of the reduced value of the investment. If you don’t understand your loan structure this can be confusing.

    Thanks Banker for pointing this out to me. Infact I do plan to sell my PPOR in the next 12 months. I don't think the value of my IP would drop (fingers crossed) but I also think it will not appreciate very much as well in that short time. But its definitely good to know the risk involved.

    Yes, I suppose it's all down to our preferences. Thanks again. :))

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