Forum Replies Created
Hi Hydra
The way around it is to take out a totally new loan for the investment rather than increase or redraw the existing PPOR loan.
By splitting the PPOR and Line of credit then the loans are the interest is easily identifyable.In essence you have it correct with a little massaging.
Richard Taylor | Australia's leading private lender
Hi Ben
Like your thinking but unfortunately in todays climate you wont finance it that way.
Lenders will lend against the purchase price or valuation whichever is the lower and realistically you will not get more than 90% LVR (Sure there are still the odd lender offering 95%) so will probably need most of your deposit just to settle.
Of course i assume that you dont quailify for the FHOG as if you do this will give your savings a boost.
Richard Taylor | Australia's leading private lender
Thats fine mimi anything you dont understand just ask.
This is what the forum is for.
Richard Taylor | Australia's leading private lender
Mim
Hate to disagree with Aaron but be very very careful in just redrawing the funds in advance on your home loan as the interest will not be deductible.
It is imperative that you establish the structure correctly to maximise the deductability of the interest and ensure both interest savings and flexibility.
The cleanest easiest way is to look at refinancing the existing loan to either an interest only loan or P & I loan with 100% offset account attached to it and then behind the initial home loan attach an investment line of credit.
This can then be used to draw down funds to cover the 20% deposit and acqusition costs of the individual investment properties.
Then take out a separate Interest Only loan to a level of 80% of the purchase price on each new IP loan.
Repeat for each new property.
This way the interest is clearly identifyable and you are not running the ATO gauntlet.
A good mortgage broker can set up on the way with both the structure and product choice.
Richard Taylor | Australia's leading private lender
If you use your own $30K as deposit then you will loose the Tax deductability of the interest.
If you borrow $30K with the purpose of using the funds for a deposit for an IP then the interest becomes deductible.
You are unable to pay down the current PPOR loan and then redraw the funds as this again fails the purpose test.
A separate new loan would be required to satisfy the ATO.If your current home loan does not have an offset account then it might be time to consider switching lenders to something more suitable to your current circumstances.
Richard Taylor | Australia's leading private lender
The rent you receive on your old PPOR wil be added to your Taxable income.
Unless your rent on the new premises you are residing in are used for any form of business then unfortunately you will not be able to claim the rent as a deduction.
Richard Taylor | Australia's leading private lender
JR
Just be careful that a Financial Adviser doesnt try and swing you into a managed fund or direct share investment.
Most FP's do not like property as they do not earn a commission from you buying an investment property.
As a Financial Planner myself I often see or speak to clients who have been given poor advice from other FP's who unfortunately give our industry a bad name.
Richard Taylor | Australia's leading private lender
Start by sticking the $30K in a 100% offset account linked to the mortgage.
This gets you the best of both worlds. Reduce your non tax deductible interest payable as well as having the funds on call if you need them.
Do not use the funds for investment where you have non deductible debt.
Long term if you decide to purchase a new IP.
Take out a separate Line of Credit against the current PPOR and use this to fund the deposit and acqusition costs on a new IP.
Fund the IP separately using a standalone loan facility.Richard Taylor | Australia's leading private lender
Post – 7% discount to borrowers of $500k – NO.
Maximum full doc loan without LMI is 80%.
Richard Taylor | Australia's leading private lender
Hi Greg
Firstly welcome to the forum and I hope you enjoy your time with us.
Wont go into the warning speech about "buying with friends or relatives" as i think you have learned the folly of your ways there.
In answer to a couple of your questions raised
Should I be looking at interest only loans for either/both properties? Yes i would recommend this with a 100% offset linked to the PPOR loan. However remember your sister in law will have a say as you wont be able to make any changes to the current loan without her agreement.
Given that the sister will own 1/3 of the investment property, I believe I could not or should not use the property to secure the loan for my new home? Again any additional loan you take out on the property will need to be in all 3 names so your sister in law may only agree to it if she can access the equity for a separate loan for her. Not Ideal.
If the above is true, when the mortgage on the existing house is refinanced, can I borrow more than the property value, to use as a deposit for my new home? ie to avoid paying mortgage insurance, and increase my negative gearing.
Couple of questions here. Yes you can use the equity in the property to offer as deposit but dont take 1 loan over the 2 securities or you will have more problems down the track. By refinancing however this does not mean that the interest on the new loan raised on the existing IP because deductible as the "purpose" of the funds will be for a PPOR deposit.
In relation to your sister in laws new partner he will have no rights to the property however might influence her when it comes to signing documentation, selling etc. Any sale of any share to him may trigger a stamp duty / CGT issue.
Have you thought about buying your sister in law out and the 2 of you owning the property.
Richard Taylor | Australia's leading private lender
Bluegrass is correct with the equity you have and depending on your marginal tax rates you could buy 2 and still reduce your tax position.
Structure is the key to successful investing along with the right property.
Richard Taylor | Australia's leading private lender
Nothing to stop you acting for yourself when selling the property however for a small outlay in engaging you will be legally protected if anything goes wrong.
As the Vendor you are responsible in drawing up the purchase contract, providing your buyer with answers to all of their search requests, organising the settlement date and discharging any mortgage you have on the land.
Must admit i have bought and sold well over 250 properties in the last 12 years and I still wouldnt do my own conveyancing.
Richard Taylor | Australia's leading private lender
Jimmy
Remember just because 120 DA approvals are being issued each year it does not mean that 120 new homes are being constructed.
The DA will have a limited lifespan and you will be suprised how many expire with nothing being done due to lack of funds, change of mind etc etc.
As long as the township has a suitable population for lending purposes then if it meets you other criteria I wouldnt have a concern about this.
Richard Taylor | Australia's leading private lender
Yes 0.7% off on loans of $700K + ($750K + with most )
Richard Taylor | Australia's leading private lender
Not the days of 0.7% + have almost been (unless the loan is $1M ++) and gone and in fact most arent offering 0.7% unless the loan is over $700-$750K.
Of course it all depends on what 0.7% off.
If the lenders SVR is 0.2% higher than its competitors then i would rather have 0.55% off a lower benchmark rate.
Some of the non bank lenders have a variable rate comparible with the 0.7% discounts anyway.
Richard Taylor | Australia's leading private lender
Hi Nit
Must admit i havent had any issues with valuations coming back short on unit properties in Brissie although there are certainly some very hot areas around the City at the time.
As long as you structure your loan correctly you wont have an issue when you decide to rent it out.
Normally suggest for clients in your position an interest only loan with 100% offset account attached.
If you want to email any addresses you are looking at i can run up a Residex report for you and email it back.
Richard Taylor | Australia's leading private lender
This can vary from State to State.
If you are merely at looking to put in an verbal offer then phone the selling agent with your price, terms and conditions and let him take it to the Vendor. Alternatively get your Solicitor / Agent to draw up the terms of offer for you.
In certain State (Qld for example) you are better of to proceed to Contract with the usual conditions (such as subject to pest inspection, building report etc) and see what they vendor has to say.
As long as you always have an out you cant go too far wrong but still care needed.
Richard Taylor | Australia's leading private lender
Hi Jr
Firstly welcome to the forum and I hope you enjoy your time with us.
Think your wife is a being a little cautious and understandably in her current state.
You have a decent amount of equity and as long as the property you look to acquire is fairly cash flow neutral then really there is absolutely no reason at all why you shouldnt start your property investing journey.
If you structure the loan correctly then no reason why you wont be able to afford it even on the one wage.
Remember with interest rates at their current level many properties are paying for themselves ignoring non cash items such as Depreciation.Richard Taylor | Australia's leading private lender
Yes financed one on the original release for a client in town and they have never had a days vacancy.
There's was only a 1 bedroom but still just as popular.
Certainly prices have also risen since the completion.
If you want to email me the address i can send you back the Residex price comparison.
Richard Taylor | Australia's leading private lender
Jack
if you want to email me the full street address I will run of a residex report for you
Richard Taylor | Australia's leading private lender
