Forum Replies Created
Hello all,
Here is the latest after a mad day of running around to the accountant and solicitors. Talk about baptism by fire! My head is still spinning.
So it looks like we will be going ahead with the loan as currently structured with my PPC mortgaged to the bank so that I could borrow 110% of the IP value. After doing some basic maths with the accountant it quickly became obvious that my tax benefits after doing this IP wouldn’t be as attractive as I had initially thought. As after my company provided salary packaging I would be in the 30% tax threshold and with the IP I would still be in this threshold. His advice was to pay 20% on the IP if possible so we won’t have to mortgage our PPC (hence reducing our overall risk).
Speaking to the broker, his suggestion is to inject funds post settlement so that we can apply to have the mortgage lifted on my PPC. Sounds quite straight forward, we just need to scrape up the funds ASAP. Any pitfalls I should watch out for? I couldn’t see any minimum term or exit penalties. The only potential problem I can see is that they can take back the 0.75% discount they gave us on the standard variable rate. But we would still get the 0.5% discount at least.Cheers to all,
Ray.Hi all, Ok as embarrassing as it may be, I finally managed to get hold of the broker and ask “So why did I choose this loan again?” This is what he said…”As we establised we wanted to maximise your tax deductions, the loan was structured so you could borrow the maximum amount against your PI. This is why your wife was set up as the guarantor, so you could borrow 110% of the PI value and get maximum tax deductions from it”…So there you have it. Did I get suckered into something? The method of setting up a LOC against the home suggest by Terry sounds painfully good. Painfully, because its the 11th hour now and probably too late for my to do anything about it.
I did get some finaly assurance from him though, that if I built up enough equity in the PI (I guess either through capital growth or my own contribution), the mortgage on my PPOR could be lifted. Is this as easy as he made it out to be?
Many thanks,
Ray.Hi Steven and Kim,
Thanks for your feedback and comments. Kim I am not quite clear on your point 2. Is there a typo there? I read a few times and it still didn’t make sense to me (yes, maybe I am really that thick!)
Steven, the answer to your questions. My wife works full time as well in the medical profession. As such, she gets fantastic salary packaging options to reduce her tax. As I am paying more tax than her (we are both on the top tax bracket for FY04/05) we thought it would be more tax effective to put the IP solely under my name to get the maximum tax benefits.
In regards to the rental return estimate, yes I believe that was one of the questions asked during our initial application meeting.Cheers,
Ray.
