Hi everyone,
I plan to get an investment property around $200K. But I don't have much cash in hand.
So I would like to know how much deposit I need and what insurance,repayment will be
current mortgage info
Property price I have acquired: $362K
Current balance: $310K
Minimum monthly payment: $1767.88 (but we pay about $2,600)
Redraw Funds available: $10K
household( me and my wife) income about $110K p.a. before taxDoes anyone can give me some suggestion?
Max lvr on an IP will be 95% (Depending on where it is located will determine whether the LMI can be capialised or not)
So you will need either 5% plus costs or 5% plus costs + LMI.
Only other option (which i cringe as i type this) is to consider cross collateralising the 2 loans and going for a 100% loan but will boil down to the valuation on your current PPOR.
Get your mortgage brokers to run the numbers for you to see how tight it will be.
Richard Taylor | Australia's leading private lender
Thank you Richard,
So can I use the redraw found ($10K) as 5% deposit?
Kind Regards,You can but the interest wont be Tax deductible and you will need more than 5% deposit.
Richard Taylor | Australia's leading private lender
Hi Richard,
Just querying your comment that the $10,000 in LOC won't be tax deductible if Eric uses it towards purchase an investment property.
I have done this on numerous occasions to buy IP and have had no problem claiming the interest as a tax deduction. If the purpose the money is used for is to produce an income producing asset such as an IP, then I am sure the interest on the money used is a tax deduction.
Am I missing something re your comment?
The problem is having both personal and investment loans mixed in one account, making it hard to account for the investment portion. If there was a seperate account then that should be fine to claim the tax deduction
I believe the interest on the redrawn money will be deductible if the money is used for the investment property.
But this will be less than ideal for a number of reasons relating to working out the tax.
– If the loan is PI and it is decreasing it can be hard to work out the proportion of the interest which should be claimed.
– if extra funds are paid into the loan the funds must be applied to both portions (investment and no investment portion) in the same percentage of the loan.eg if you have a 95,000 loan with $5,000 redraw. YOu take $5,000 out for investment. then 95% of this loan is non-deductible.
if you then pay $100 into it, above the interest, then 5% of this $100 is attributable to the investment portion. if the next month you pay another $100 in, then 5% of this must come off the investment portion. So you can see it gets complex.a way to avoid this is the set up a separate loan account.
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
Terry – I agree entirely. Thanks for the explanation.
Much better to keep borrowings simple – sure makes tax time easier.
Terry's answer beat me to it.
Richard Taylor | Australia's leading private lender
Thank you everyone. It is really helpful.
So it will be better not touch the redrawn money. or at least setup different loan accounts.cheers
Precisely and try and keep the loans separate where possible.
Richard Taylor | Australia's leading private lender
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