Hi all,
I’m looking to purchase a second investment property.
My broker says to refinance my current loan on investment property 1 to access the equity in it to allow for part of it to be used as a deposit for property 2. Lets say plus $100,000.
Then he says he can get a pre-approval for the second property worth $400,000 (which is 80% of the estimated purchase price to avoid LMI).
Would this be the correct structure to follow?
Would this be ok for tax purposes as the $100,000 increase will go into my offset account for the first property. Or should I be geting a Line of credit to separate this equity to be used for a deposit?
Cheers
Yes wouldn't have an issue with the structure recommended.
Richard Taylor | Australia's leading private lender
Be careful about borrowing money and putting it in an offset account before using it to invest. You could be breaking the connection between borrowing and investing.
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
I agree with Terry.
If I were you I would not unlock the equity until just before settlement of the new property (or at least when the deposit is due). If you place it into an offset account and then do not buy the investment for say 6 months, there may be some uncertainty as to the use of the borrowed funds.
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