Please help – Debt in PPOR is $210K. We have a total debt of around $978K includes IPs.
We have recently sold one of our IPs, and will end up with a net surplus of around $320K pre CGT. (CGT will due at next tax return for FYE 2010)
We will set up an offset a/c directly linked to our PPOR, at the same amount of our debt ($210K).
But we aren’t sure what to do with the balance. Any suggestion? We are planning to see a financial planner to help us structure our portfolio, but thought it’d be nice to have some other views before hand.
PS. The PPOR recently valued for $500K. Our bank has given us a DSR of 69.17% – not sure if this is normal or not. So our loan limit under PPOR is now only $346K. We will be down to one wage only in few weeks time.
Nani
Email MeThe road to success is always under construction
OOOPSSSS…. Got the figures wrong.
We have a loan limit of $830K. Debt $700K includes PPOR and IPs.
Nani
Email MeThe road to success is always under construction
I think you should set up another 100% offset account attached to one of the remaining investment properties and park it there for the meantime. You may need this account long term anyway as your PPOR will essentially be paid off.
If you will be down to one wage, then it may work out better to park it into a high interest account in the name of the lower income earner – though bear in mind the CG may make it not too good this financial year.
Or you may want to set up a discretionary trust and gift the money to the trust and keep it in the bank until you purchase the next property or shares etc.
I wouldn't pay off any investment loans because once you have the money is trapped unless you withdraw it for further invesmtents. If you pay down a loan and then reborrow for personal use you will have adverse tax consequences.
Not sure what you mean by the DSR. Are you saying the bank is reducing the limit on your loan because of one stopping work?
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
Thanks Terry.
The IP which we sold was cross-collateralised with our PPOR. SO when we release the IP, the bank did a valuation on our PPOR. It came back at $500K.
Originally we had a limit of $445K attached to this IP & PPOR. The bank said their new DSR is now 69.17%, so we had to reduce our loan limit to $345K.
Nani
Email MeThe road to success is always under construction
Terryw wrote:Not sure what you mean by the DSR. Are you saying the bank is reducing the limit on your loan because of one stopping work?DSR = Debt Security Ratio (LVR)
(Long time Bank/Finance worker
samson wrote:Thanks Terry.The IP which we sold was cross-collateralised with our PPOR. SO when we release the IP, the bank did a valuation on our PPOR. It came back at $500K.
Originally we had a limit of $445K attached to this IP & PPOR. The bank said their new DSR is now 69.17%, so we had to reduce our loan limit to $345K.
Damn, if only you didn't cross the loans you would have had another $100,000 to play with.
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
Yes, Terry. We have already cried over it !!
This happens in the days when we didn't know any better and depending on our mortgage broker who didn't advise us any other ways.
We hope that we can still continue to build our investment portfolio based on where we are now.
Nani
Email MeThe road to success is always under construction
Hi Samson
Look i hate to say with your current lender and a DSR of nearly 70% there is no chance they will advance any more funds for a new IP.
I am sure your FInancial Planner is good at what he does but would have no idea on how to restructure a loan portfolio to maximise your borrowing ability.
Probably advise you to walk away from property as he has some excellent managed funds which he can put you into with a margin loan.
Think you need some specialised advice.
Richard Taylor | Australia's leading private lender
Woo.. the gospel.. Do NOT X- collaterised… now I can understand from the scenario
Rest my case GOM.
The record is now broken.
Richard Taylor | Australia's leading private lender
The other major drawback with CC is not being able to sell one property when the remaining one has dropped in value – which happened to a friend of mine and resulted in bankruptcy.
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
hmmm….. not sure to say thanks or not 'coz now we are feeling gloomy!!
No, seriously, thanks guys. Yes, we realise our mistakes. It may be a bit too late, but we did wake up to it. Not by anyone's advice, but only because we decided we didn't want to put all our eggs (loans) in one basket (lender).
So, we have other IPs which are stand alone with different lenders. Perhaps by lying low for a while and reducing our PPOR debt through offset a/c, we hope we could find another IPs which could also stand alone.
Nani
Email MeThe road to success is always under construction
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