Hi all. Thanks in advance for any advice. I have a property I’m interested in and do’t know if to pay the dposit with cash from a redraw on my ppor loc loan or take a loan for the whole amount. I have 1 Ip this would be on a second. The price for the 2nd would be around the 190k mark. I have 35 k in redraw and plenty of equity. What’s your thoughts?
Wow Dylan just hold on there.
Please dont take the funds from a redraw on your PPOR otherwise you will have real issues in trying to claim interest on the funds as a the original purpose was not for investment.
I suggest you would open up a second account i.e line of credit and use this to cover the deposit.
Then take out a separate loan probably to 80% of the purhcase price on the new IP.
Keeping it clean now will save you a lot in the long run.
Of course it goes without saying please donot cross collarteralise the securities.
Richard Taylor | Australia's leading private lender
If you take a loan for the whole amount you still need to find money for the deposit and you would be risking losing both houses through cross collateral of the two properties.
You can borrow from the LOC but it is better to have no other private use loan in the LOC.
So that 100% of the LOC has been used for investment purposes to fund the 2nd IP
If you have private use on the LOC you may need to set up another LOC account for this investment purpose.
It makes it easier at tax time to work out the investment interest for IP 2.I would also try and get away with as little initial deposit when buying the property and then paying the remaining deposit before settlement during the settlement period. Usually your solicitor will tell you that the remaining deposit has to be paid.
some old posts on similar theme
https://www.propertyinvesting.com/forums/property-investing/help-needed/4330502?highlight=cross
https://www.propertyinvesting.com/forums/getting-technical/legal-accounting/4330668?highlight=cross
https://www.propertyinvesting.com/forums/getting-technical/finance/4330653?highlight=cross
https://www.propertyinvesting.com/forums/property-investing/general-property/4330647?highlight=cross
https://www.propertyinvesting.com/forums/property-investing/help-needed/4330566?highlight=crossIf you were to use your cash that would mean you have a lower investment loan and a higher PPOR loan (as the cash could have been used to pay this down).
This means less tax deductions.
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 everyone. I've been ofered a product from my finance broker where my ppor is seperate from my other 2 loans. The other 2 loans being my new ip and my original ip ( These 2 are combined ) Is this still cross colatterising? Should I have 3 seperate loans or is this exceptable?
could be. Make sure only one property secures each loan.
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'm on the same situation at the moment. As far as know you can use part or the full amount of your PPOR as a deposit or to avoid LMI on an investment and still able to claim the interest as a tax deduction. please refer to the link of the ato website CLAUSE 23.
Hope this help.
http://law.ato.gov.au/atolaw/view.htm?rank=find&act=2000%2F2~Public%20Rulings,%20Determinations%20and%20Bulletins&criteria=AND~(%3F%222000%2F2%22)~docref~exact&target=EA&style=java&sdocid=TXR/TR20002/NAT/ATO/00001&recStart=1&PiT=99991231235958&recnum=1&tot=10&pn=RDB:::RDBsorry, please copy and paste the whole link to be able to see it. if you click on wont work.
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