Have my primary residence loan 700000 and value probably between 1.1 and 1.2
IP loan 214000 value 750000. Rented 350 per week. The rent covers my loan and property expenses atm so it costs nothing to hold until the last couple rate rises.
Things at home are tight with such a large personal mortgage and we are not interested in selling our PR.
I want to get a LOE to pay for the excess interest in the IP and any other expenses that come up relating to the property and am also considering buying a second IP but again will need to borrow a larger LOE to cover the excess interest and expenses. I am looking at long term equity growth rather than cashflow positive.
I have found though that the banks are quite conservtive and do not like this sort of thing. Any advice on either approaching them at the right angle to get the LOE or are there other lenders I should be talking to?
I am also considering refinacing with some of the online mortgage companies that are offering better interest rates than the banks by at least 0.3% does anyone have any expereince with pacific mortgage group?
Setting up a structure for LOE is pretty easy, you use a LOC or cash out and place the funds in an offset account against one proiperty and use the borrowed funds to make interest payments for other loans. The question you have to ask yourself is how you are going to exit the higher debt position at some stage in the future. You cannot expand your debt position indefinately without significant risk.
With regard to lenders, I very much doubt it would be in your interests to go outside of the banking sector for your loans. Non bank lenders almost always securitise their loans, meaning that your loans would be mortgage insured even if your leverage is less than 80%. This would likely cause you some issues, and probably money, in future. Your loan amount is enough to negotiate your rate down a little in any case so any difference in immediate cost will be negligible.
Regards
AlistairHi and welcome to the forum i hope you enjoy your time with us.
As Alistair has mentioned a securitsed lender mortgage insures every loan irrespective of the loan to value and also raises its funds from the the debt market rather than retail deposits. As such you will start to see the margins erode and their cost of funds get more expensive.
Remember what is cheap today can be extremely expensive in the long run.
Without additional information it is difficult to give you any practical advice however subject to serviceability and equity what you are trying to achieve isnt difficult.
Richard Taylor | Australia's leading private lender
Have you looked into debt recycling? You could pay the rent to yourself and capitalise all investment costs, including interest, within a new loan account (or your existing investment loan if the limit is high enough).
Don't waste your time talking to the bank about LOE. Find an investment savvy mortgage broker to set up the structure and discuss the tax implications with your accountant. Watch the figures closely and NEVER draw on your investment account for personal expenses.
"Have you looked into debt recycling? You could pay the rent to yourself and capitalise all investment costs, including interest, within a new loan account (or your existing investment loan if the limit is high enough). "
I had thought about this but was not sure about the legality of such as structure using rental funds etc to pour into my home loan instead of the investment loan. I would love to achieve this as the PR is obviously not deductible so wasted interest. The equity in the investment property would allow this easily.
Can someone comment on legality of such a strategy?
Qlds007 "thanks yes only joined up Monday" my main aim is the equity growth. The IP was my primary residence and I have only owned it for 8 years and it is now 3.5 times the value of what I paid for it. On my new PR we borrowed the lot including stamp etc and it is already now 47% growth across 2 years. Thinking of getting a third property as an IP and using a loan to fund the interest payments across 4 years as rental increases in current IP and future one would close the gap on my out of pockets plus will give enough negative gear to ensure I pay small amount of tax if at all.
Perth market has very little number of rentals within 5k of the city and with rents starting to achieve $450 per week for anything with 3 bedrooms the rent returns are quite good. Especially given these areas will keep growing very well.
Thinking of getting a third property as an IP and using a loan to fund the interest payments across 4 years as rental increases in current IP and future one would close the gap on my out of pockets plus will give enough negative gear to ensure I pay small amount of tax if at all.
There are many totally legal strategies to use it is just a matter of correctly structuring and funding the deals accordingly.
Richard Taylor | Australia's leading private lender
rgarreffa wrote:Can someone comment on legality of such a strategy?* Google "debt recycling"
* Talk to your accountant.
* Give your IP savvy broker a call
* Ring RichardMy understanding is that debt recycling is a fairly common method that investors use us repay their home loan quickly and ensure that all of thier debt is tax deductible.
You have lots of equity so a broker shold be able to release some of it if needed.
Thanks guys. Called the bank manager and thankfully is fully on the ball with this stuff as his brother does it. 5 minute chat and everything is sorted. Also need to go sleep with my previous bank manager as when he refinanced my property loan he fixed it until 2012 on 7.09%. Thanks for the help I can see a few IP's heading into my portfolio in the next 12 months.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
