Forum Replies Created
Hi Daniel,
First off anytime you incur capital gains, it is added and forms part of your taxable income for the year, and is then taxed at the appropriate rate.
However, in your case if it is indeed your main residence (and no part of it was rented out, etc) then there is no capital gains, and therefore no tax to be paid on the profit (and will be tax free no matter what the amount).
Cheers for clearing that up up Richard.
Same as if you have a long term IP loan and refinance within the first few years, you can claim any remaining non-deducted LMI premium in one hit on the following tax return.
It all depends on your comfort level in how much debt you would like to handle, and if you can do more with the excess funds you have. Some people are fine with having a high LVR, while others see it as too much of a risk.
In regards to LMI, as it is an IP, LMI is tax deductible over 5 years, can be capitalised onto the loan, and interest charged on the LMI is deductible as well.
From your post I assume the PPOR and IP1 are cross collateralized, and the lender won't take above 80% due to the company title of the IP1.
Why don't you then refinance into 2 separate loans, one loan on 80% of the IP ($490K x 80% = 392K), the other on the PPOR of $810K ($610K existing PPOR + outstanding IP of $110K + $90K increase). It leaves an LVR of just over 85% which would mean LMI involved but at least it should be able to be done without involving IP2 in any way.
Agree xdrew.
There are people out there who see us brokers as a thorn in the side. The most common negative comment I hear are that we brokers only direct clients to the highest paying commission lenders, and therefore don't have their best interests at heart.
It's only when you give them an insight of the benefits of using a broker, that they start to realise we aren't a bad lot after all.
sgoodes wrote:I have no idea. They shift the goal posts to suit themselves these days. In one breath they are all good to incorporate difference between actual bank value against purchase price in regards to deposit to allow me buy a decent home knowing that I am no risk then next breath change everything. I have a perfect credit history, secure employment 180k +, 30 yrs history with cba and it means nothing.My guess is they must look upon it as a favorable sale, and the LMI underwriter has rejected it.
Qlds007 wrote:Thanks Firewater for the update. Yes there are now several lenders who would do this and some great interest rates around for such loans. Shame that Hank had to have me banned from his Company's forum guess they didn't like other Brokers telling it as it is. Cheers Yours in FinanceYou're not the only one Richard. I was too banned recently, and was given no reason as to why.
However what really irked me was that after banning me, Hank put his name to one of my posts in one of the threads thereby claiming it as his own. Thought that was totally unprofessional.
Paul,
Also keep in mind depending on the amount of the purchase, you need to allow for stamp duty and other related costs such as conveyancing, building insurance, etc. FHOG can be offset against it, but it still needs to be accounted for.
Hi Lorraine,
You should avoid cross collaterisation of your properties. The less control the lender has over your properties, the better, especially if your PPOR is involved in any way!
If you can structure theses loans via cross collaterisation, you should be able to structure them as standalone loans. Even with LMI involved, it's a small price to pay, and as it's for an investment property, the LMI is tax deductible over 5 years.
K,
In terms of structuring, yep, most lenders will allow a max 90% LVR for cash out, so those amounts you have are correct if the valuations are right. You need to be aware that LMI will be charged with the increases though. Whether these charge can be capped onto their respective loan depends on your lenders policy.
In accessing the equity, I would suggest a split on each loan with either LOC or IO loan for the new funds, so it doesn't get mixed with other funds and will be nice and easy for tax purposes calculations, especially considering the third property will be a PPOR in the future.
First off with the CBA loan, why did you have a standard variable rate product without a package? Unless the loan amount is really small, surely the package discount would offset the yearly fee? The standard variable rate is basically a recommended retail rate that hardly anyone pays.
Moving on to the offset facility. In terms of the interest you are paying, there is no difference if the extra funds were paid on the loan itself or into the offset account. However some advantages of an offset account is it firstly gives you greater control over your funds (as they say cash is king), and secondly if you have a property that is going to be an IP in the future, you maximise future tax deductions more so than if you paid into the loan and redrew later on.
However you will need to be disciplined and not be liable to spend the excess funds sitting in the offset account otherwise it's no use having it.
As per the two posts above, the goal should always be to pay your PPOR debt down rather than an IP debt.
It could be taken one step further if you are thinking at converting your current PPOR into an IP down the track to even change that to an IO loan with 100% offset.
Best option would be to utilize it as an IO loan with 100% offset. Any excess funds can be distributed in the offset account. The reason for doing it this way rather than paying down the loan is that it allows greater control over your funds down the track, it's yours to do what you want with it without affecting the tax deductibility of the loan.
Example: Your initial loan was $285K IO and in two years time your 10 year old Mazda conks out and you decide it's time to update to a Toyota Aurion for personal use.
If in that time you had paid the loan down say by an extra $25K to $260K and then redrew $25K for the car, the balance would be back to $285K however only $260K will be deductible debt due to the personal nature of the loan withdrawal. If on the other hand you still had the $285K loan with $25K in the offset, you could pull out the $25K in the offset to buy the car and still have full deductibility on the $285K loan.
Not to say that you can't pay down the loan and redraw for investment purposes which would be deductible debt, however in the end with money in the offset you have better control. As they say cash in king!
Carbon tax must be hitting home already
It's a pretty decent increase by Bankwest on living expenses. Homeside, despite using the same method is way lower on living expenses across the board. Combine this with the phasing out of their lo-doc product, in my opinion Bankwest can only lose customers to other lenders.
The issue with trying to get a loan before you move is the lender will ask whether there are any foreseeable changes in your circumstances that may affect repayments of the loan. Moving interstate, quitting your current job, and starting a new job would suggest the answer is yes to this question.
Whether the lender will approve the loan (especially if you have no new job lined up) would be questionable. You would need to assure them that the move won't heighten the risk of any default on the loan.
As Jamie mentioned, it all depends on what your new job is and how it fits in with the lenders policies.
As a worst case scenario, most lenders will accept you after 3 months at a new place of employment provided you have also completed your probationary period.
Same thing happened in May with NAB and Homeside who changed their living expenses to utilise the HEM method.
Before that, living expenses on a married couple was very generous, was able to process a lot of deals through where it couldn't service elsewhere, and then it increased 25% overnight.
