All Topics / Help Needed! / Using Equity to fund Investment Costs

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  • Profile photo of rabeyrabey
    Member
    @rabey
    Join Date: 2005
    Post Count: 1
    October 28, 2005 - 3:04 am

    Hi all… I am new to the forum, so apologies for any breaches of etiquette!
    [confused2]
    We have a mortgage on our family home and a number of investment properties also with loans attached. We have varied levels of equity in all our properties.

    The question is, can we use all our income (ie salary plus rental) to pay down our Home mortgage faster and use equity loans to fully fund the cost of the investment properties? ie mortgages, council rates, maintenance etc? This seems to be more advantageous from a tax standpoint. I have heard of using equity to fund investments (NEVER personal expenses), but not a lot about using it to fund current investment commitments.

    Appreciate any thoughts.

    MR

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781
    October 28, 2005 - 4:09 am

    If I understand what you are saying then I think the answer is yes. However you cannot claim any capitalised interest.

    So you are suggesting that you let your IP LOC pay for all expenses (less interest) to do with the property and funnel all other income into your PPOR? This is possible.

    I would suggest you use an offset account if you have even the slightest intent to rent this PPOR out in the future.

    Cheers,

    Simon Macks
    Residential and Commercial Finance Broker
    ***NODOC @ 7.15% to 70% LVR***
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of ShwingShwing
    Participant
    @shwing
    Join Date: 2005
    Post Count: 219
    October 28, 2005 - 7:08 am

    Hi Rabey,

    That is how I pay all my IP expenses that are not already deducted by the PM.
    I don’t authorise the PM to pay any of my expenses, like BC, insurance, rates etc. Only adhoc maintenance that they organise if required. I draw down from a seperate investment account against my PPOR mortgage. All rental income goes into my mortgage, every month the interest due on the investment account is swept across from the PPOR account.
    The balance on the investment component keeps increasing, but you pay off your mortgage faster. It’s an effective method of moving your Personal debt to Investment debt legally, as your rental income does not have to be used to pay the expenses. But as Simon said, you cannot claim any capitalised the interest. Easier just to pay it when it’s due.

    Mal

    Getting out of your comfort zone, can help you become comfortable

    Profile photo of ellabooellaboo
    Member
    @ellaboo
    Join Date: 2004
    Post Count: 12
    October 29, 2005 - 4:14 am

    hi Rabey
    Am also new to these forums and have just started to venture into PI. I am in similar situation i that have PPOR still with mortgage about 200k equity and IP which is neg geared and having to top up each month. Have about 50k equity in IP. I am have IO loan on IP and P&I on PPOR. Is there a better structure so am not having to top up out of own funds, Im sure theres a smarter or more efficient way for me to structure . Would appreciate any advice as would like to move forward and purchase more IP in near future .
    [strum]Ellaboo

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