Hi,
I am a relatively new investor and am learning more and more from reading this excellent forum.
I have one IP currently and have just set up a Discretionary Trust to continue investing. I have borrowed funds from my IP (in my name) to assist with deposit and closing costs for new investment for Trust.
With my new loan I am not sure which way to go in regards to having a 100% offset account or to have a redraw facility attached to the loan. Will it make any difference for the Trust? What about further investments etc?
Any advice would be greatly appreciated…
RJB
You could have both but personally i would recommend an offset account to a client on the basis they have no other non deductible debt.
Richard Taylor | Australia's leading private lender
You must realise the difference between the too.
With redraw you are taking money out of a loan = reborrowing. If you borrow money the deductibility of interest will depend on what it is used for.
Offset = separate account linked to a loan. So you can avoid all these problems.
I would suggest you use an IO loan with 100% offset account attached. Don't pay anything off the loan and put all rent and spare cash in the offset.
When the trust property grows in value I suggest you set up a new split or a LOC on this property and use that as deposit for the next one etc.
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
Hi all,
Been looking around the forum for a while. I've had a similar question to RJB, so in stead of asking i again i've posted in here, hope you don't mind RJB.
Currently in the whole process of getting a loan approval and finding a place that my partner and I would like. Would it be better for me to setup an 100% Offset a/c like ANZ One and linking it to ANZ loan paying IO? And have all or part of our wages put into it when we get paid. I've read in other posts it's recommended to do it this way as per explaination above by Terryw, if we was to get a IP down the track.
But would this all apply also for a FHO?
Thanks for any help
If there is any chance that the property will be rented out in the future then IO is best. Having an offset will help you save the same interest.
The only time I would recommend PI is if you are tempted to spend cash if it builds up in your savings 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
Thanks Terryw
Just say cash builds up and you need to purchase a new family car. Would it be best to have that cash in the Offset a/c then?
So for the interest sake rather then opening another a/c just to save for the new car where you could pay tax on the interest
thanks
Work Ur Money
Hi All,
Thanks for your replies.
It seems an offset account makes the most sense in regards to how to use the money now and borrowing further in the future. Using an LOC to fund the next project also seems the way to go.
Thanks again…
Work Ur Money wrote:Thanks TerrywJust say cash builds up and you need to purchase a new family car. Would it be best to have that cash in the Offset a/c then?
So for the interest sake rather then opening another a/c just to save for the new car where you could pay tax on the interest
thanks
Work Ur Money
Yeah, just build the cash up in the offset so that it will save you interest. Keep it there as long as possible and then use it. When you take it out interest will increase, but it will work out better than saving in a separate savings 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
Thanks TerryW
Need to consider if i need to get a Anz Breakfree package setup or just have the ANZ loan an the ANZ-One. If i had a few loans it would be worth it, to take the $340 a year, but I'm not sure if that $340p.a will waive all the loan fees and the CC fee etc…. something i'll ask on Thursdays appointment!
Work Ur Money
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