one for richard and terry. please excuse the ignorance from one who has not used one before.
Does a 100% offset account connected to a IO loan on a IP work? I believe your pay, rent and any other income goes into this account?
Does the interest payment for the IO loan come from this account? can the account be used as a transaction account?
Hi IZ
Yes to both but of course you wouldn't have one where you still have some non deductible debt.
Richard Taylor | Australia's leading private lender
IZ, just to expand on Richard's comment, it is a good idea to set up an offset account for each new property anyway, even if you still have some non-deductible debt.
As Richard said, you would put all spare cash into the offset account against the non-deductible debt until such time as it is repaid in full, however it is good to get the structure for the IP's correct to begin with as well.
Qlds007 wrote:Hi IZYes to both but of course you wouldn't have one where you still have some non deductible debt.
So if you have a PPOR with an P&I loan but have to rent it out because you have moved to a regional centre due to a promotion and you are sure you won't be living back in this house BUT won't be selling it so……..
you convert the loan to IO with a 100% off set account. you have a small credit card debit as the only non deductible debt.
I'm asking for my son who is in this situation.
I would have an interest only loan even if the loan was for owner occupation.
Richard Taylor | Australia's leading private lender
Qlds007 wrote:I would have an interest only loan even if the loan was for owner occupation.Why? I thought conventional wisdom suggests one tries to "own" their PPOR.
Simply because what starts out as a PPOR can often easily end up being an IP when you decide to move out and upgrade and then want to keep the original PPOR as an IP.
Flexibility is key when buying property and sourcing loans.
Richard Taylor | Australia's leading private lender
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