Hi. First post I have done. Hubby and I have PPOR with no mortgage in Melbourne. Value about $500K. Also have IP we bought 1 year ago in a VIC tourist town for $170K and now worth about $240K after cosmetic makeover – just lots of paint really. Owe $150K. Seasonal rental of approx $9K per annum.
Now we are looking to move to Sydney for family reasons. However we want to keep both properties. Intend to rent out Melbourne house as well. Est $400pw. Sydney property is about $750 to $800K. Have $20K to put towards it. Any suggestions on fancy finacing so as to minimise repayments?Sydney Bound
Easy. Assuming you are not working, you could get a No Doc loan securred on your Melbourne property at 70% LVR = $350,000.
You can then get a 70% No Doc on the new Sydney property of $560,000 (assuming $800,000 val) with the deposit and costs coming from the fist No Doc. The $20,000 cash you have should be used on the Sydney property to keep the non-deductible interest down – put in a 100% offset if possible. IO on all loans preferrably too.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Can you service the interest payments on the Property though;
If you spend $800k, and use $20K as some of the deposit, and finance the rest as Terry mentioned, you will have a debt on that Sydney property of around $780k – say $750k for round figures.
The interest per month, assuming an 8% interest rate will be $5,000.
With the other 2 properties, allow for a NETT rent after all expenses etc of around 80% of the rent back to you.
I would suggest that you move to Sydney and rent for a while first, then after you're established there and you know what your rent patterns will be for your Melb properties, then look at buying somewhere.
Look at selling the Melbourne property into Trust and borrow 100% of the current valuation using the net funds as deposit for your new Sydney property.
This makes the interest 100% Tax deductible and although Stamp Duty will be payable on the Transfer the savings will be vast over the years.
If you buy for 700-800K and have say $480K deposit the amount of non tax deductible interest will be affordable.
Richard Taylor | Australia's leading private lender
Thanks for all the ideas.
Terry – We can't really handle the repayments that way like Marc said. And Mark, with teenagers who aren't totally on board with the move, we have to keep things stable so renting is not the way for us.
Now Richard your idea sounds interesting. Do we see an accountant or solicitor about setting up trusts? Any good people in either Sydney or Melbourne you would recommend? Are there any pitfalls we should be aware of and is it al OK with the ATO?SB
Yes all is ok with the ATO as long as the structure is correct.
Would need to crunch the figures for you to ensure that it is viable but more personal details would be needed.Downfalls would include stamp duty payable on the Transfer.
To be honest most Solicitors / Accoutants wouldnt have a clue but certainly recommend someone if the numbers worked out ok for you.
Richard Taylor | Australia's leading private lender
Hi SB
If you cannot afford the repayments, then there is not much you can do other than borrow a bit extra to help with the payments – but then you are hoping on capital gains to make it viable. Having a trust is a good idea, but the overall loan sizes will be the same – or maybe more if stamp duty is factored in.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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