Forum Replies Created
Terry is correct.
If say you had a $370K loan at the start and paid off $70K to make the balance $300K, the tax deductible amount would be the interest on the $300K when it turned into an IP. However this is only if you didn’t redraw any funds from the loan during the term. If you did, then as Terry alluded to, it is a bit of a mess and your accountant would have to figure what ratio is and isn’t deductible.
Cheers
Tom
I have just told one member of this forum that i have to charge him $500 to discuss anything further. Going back through my emails I see the first time he contacted me was in 2007. I recalled various long phone calls numerous hours explaining loan structures, deductibility of interest etc. He would go away and the resurface approximately every 12 months. About last year he rang me for another 1 hour conversation and then he sends me a loan structure email on the letterhead of another broker, meaning he had been shopping around. He contacted me again and I said I have to charge you $500. He asked me if I was serious! Then he went away, recently coming back again last week saying XX (a broker) was in Europe and he needed a question answered urgently – by this time he had changed banks. This time I politely told him to not contact me again. He still doesn’t understand that I made absolutely no money from him and wasted hours and hours of time talking and emailing him.
I had a broker friend in a similar situation recently. He had a client with a complex scenario and in which he helped for a month discussing structures, etc. The client then took all this information and went to another broker to help him. The other broker then stuffed things up so the client came back asking for my broker friend to continue with his loans. My friend then emailed him a quote advising he was charging $2,000 before he continued with anything. The client was taken aback and asked why he was being charged anything as he was initially told the services were free. The response was “that was a month ago before you screwed me over.”
In response to the OP, its a matter of building a relationship with a broker. This is done through trust and respect. Nothing wrong with having prelim discussions with brokers but once you find one, the worst thing you can do is snob them off for another if they put in a heap of work on your behalf (unless obviously they are screwing things up).
In respect to where brokers claim their services are free, if they are charging then they MUST provide the client with a quote stating what and how much they are charging. It is illegal to charge someone and not do this.
Cheers
Tom
Totally agree. I wish I knew this when I was advised by my brokers and property advsiors that x coll is the best thing.
Cheers
The only meant it was the best thing for them as it only needed one application to submit, and not multiple. Basically they were lazy which is never a good thing for the client.
Cheers
Tom
I might get on this bandwagon and ask for some help too if i can. I’m trying to get my first IP soon, macquarie have asked me the fowlloing questions i am not sure if i’ve answered correctl.
3) regarding your preferred loan structure:
a) did you prefer 2 separate loans? Yes
b) for the loan increase to the current property – if you choose 2 loans, would you like that loan split in to 2 to reflect the current loan being refinanced and the extra borrowings for the purchase?I would like to use the equity in my existing property (80% would be about 240,000k)
I will need to access the equity as a separate loan split under the same security to maximize tax deductibility and to make it easy for my accountant to work out what those figures are come tax time.I’m assuming that you are looking at tapping into the equity of your PPOR for the IP? In that case the separate splits are okay. However there is no need to access the full 80% ($240K) of the equity in your existing property. Should be just enough to complete deposit and closing costs and have the main loan against new property.
c) if you prefer just the one loan – would you like 3 splits to
reflect:
i) the current loan being refinanced
ii) the increase to the current loan (for the property being
purchased?)
iii) the other part of the loan for the new property being
purchasedThis is a no no as it sounds like it is being cross-collaterised here.
Cheers
Tom
Yep, if your saving for a PPOR when you have an existing IP, then IO with offset is the way to go on the IP loan.
Any “principal” that would have been paid can be directed to the offset thereby reducing the interest to be paid which then leads to more funds being saved for that month. Then rinse and repeat.
When you find your PPOR, withdraw the offset funds and use as deposit, this way you have done everything you can to maximise your deductible debt.
Cheers
Tom
As it was rented out first then the CGT is calculated proportionally to the time rented out.
If it was lived in first then the calculation would be different.
That’s just the way the ATO laws are.
Cheers
Tom
Agree with the others above. Do not cross-collaterise as the only one this benefits is the lender.
The lender has all the control and if you get into any financial difficulty then your whole portfolio is at risk.
Put the control back into your hands and get a decent broker to sort it out for you ASAP.
Cheers
Tom
There are so many reasons not to cross loans. Banks have all the control. They can basically dictate to you what to do if you ever decide to sell or try to gain equity (i.e. you might not see the money from a sale or they won't let you access equity as your other propertie(s) have devalued).
Cheers
Tom
tom123 wrote:Hi PLC,That's really interesting, Is there any other documents you might have to blacken out? and when you email them to the lender, which department would you email them to / contact?
Cheers, Tom
Off the top of my head I cannot think of anything apart from tax file numbers. When you email the supporting documents for the loan application, the recipient is usually the lenders credit assessment team.
tom123 wrote:Also what other issues need to be addressed following a loan approval to assist with the loan settlement?This is where a decent conveyancer/solicitor gets involved and helps out. Legal documents to be prepared and submitted, title searches, adjustment of rates, etc.
Cheers
Tom
Qlds007 wrote:He lost me on post number 12 let alone post number 37.I am totally confused.
I can understand posters wanting to help others out, but apart from the bewildering comments what is it with digging up old threads that are clearly dead and buried and rehashing them now?
Cheers
Tom
Hi Tom,
When my clients are buying, I usually advise them to allow a minimum of 45 days settlement from date of signing the contract. That way I'm pretty confident that the loan will be submitted, approved, docs signed and returned, lender vetted, and settlement booked in time.
It can be done in a shorter time frame, however with Murphy and his laws abound, I tell them better to be safe than sorry, and the last thing they want is to be paying penalty interest.
In terms of privacy, with NCCP and the privacy act we brokers need to adhere to the regulations which includes blackening any tax file numbers before passing information on, storing hard copies in locked cabinets, etc.
Cheers
Tom
You need to realise that actual equity and usable equity are two different things when it comes to borrowing, and Jamie basically covered that part of the equation above.
To answer the other part of your question Newbie, you should really access the equity as a separate loan split under the same security, especially where IP's are concerned. That way tax deductibility is maximised and it makes it easy for your accountant to work out what those figures are come tax time.
So using Jamie's example above for 90% maximum loan the structure would look something like this:
Property Value – $300K
Loan 1 – $240K (existing loan)
Loan 2 – $30K (new equity loan split)
Cheers
Tom
One other thing not mentioned is with an investment there might be ongoing rental payments you pay which are an expense that aren't included when buying a PPOR. This will drastically affect borrowing capacity.
As mentioned too many variables are taken into account and it's not as straightforward as might be expected at first glance.
Cheers
Tom
Ferdnand as Richard mentioned, there are better ways to use the cash than straight out as a deposit. If you don't like the money lying around use it to pay your existing PPOR mortgage, and then take out a loan for the cash amount against the PPOR and use that as the deposit. You still have the same total loan amount however it is advantageous as you maximise you deductibility come tax time.
Cheers
Tom
Hi Robbie,
In my opinion houses are better deals than apartments because you have greater options on what you can do with them going forward, and generally capital gain is higher with houses than apartments all things being equal.
Within your price range you will most likely be limited to one bedroom apartments in the inner city suburbs (you might find some 2 bedroom student apartments but I would stay away from them) which limits appeal and your future growth. While in the outer suburbs like you mentioned, even though they aren't the flashiest going around, you can get yourself a decent 3 bedroom property.
Though I would probably stay away from Werribee, not my cup of tea.
Others may have different opinions to me.
Cheers
Tom
As Jamie mentioned, the purpose of investing is not to claim money back come tax time, it is to make money in the long run whether it be through rental returns and/or capital gains.
The offset account you have gives you the possibility of going two ways. You can buy a PPOR using the money in the offset as a deposit and turning the current property into an IP. This allows the current loan to become deductible. Or if you want to stay in the current property long term and buy a new IP instead, you can use the money in the offset to pay down the current loan and then use the new created equity for your deposit on the new IP to maximise your deductibility. All structured correctly of course.
You just need to make a plan on what your long range goals are and then proceed accordingly.
Cheers
Tom
Agree with Richard.
You will find any rebates will be taken into account when the valuations are done so will come in lower, so you will still have to meet the savings requirements of the lender (i.e can't use the rebate as your deposit equity).
Cheers
Tom
This was mentioned and discussed in another thread on this forum a week or so ago.
As I said there, every year we have some doomsdayer talking about the collapse of the Australian property market, in fact Mr Dent predicted it would happen 2 years back. Funny how it didn't eventuate then. Suppose if he goes to the well enough times……….
Cheers
Tom
Like Jamie said a comparison rate allows you to gauge the truer interest rate after taking into account other costs associated with the loan. So a loan with no or minimal fees & costs will have a comparison rate close to the advertised interest rate while a loan with higher fees, costs will have a comparison rate much higher than the advertised rate.
It may not have a major effect on the best product suitable for your needs, but I thought the broker should have at least known what it incorporated.
Cheers
Tom
