We have a LOC already approved (250K) and waiting to be drawn on. The LOC will only be used for IP (not personal).
We are looking at purchasing a cheap property in a regional area and renovate it prior to tenanting.
The plan goes like this:-
- Use LOC for 10% deposit.
- Use LOC for balance on settlement (incl Stamps etc).
- Use LOC for the renovations.
- After having tenants move in and things settle down, to refinance approx 80% and pay back into the LOC for future use on other property.
So, is this possible or are their problems such as tax deductability of interest etc for the LOC or anything else?
Thanks……………..Mick
generally that should be ok. Check with your accountant.
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
Sounds fine – why not use the LOC for a 20% deposit? That way you can avoid paying lenders mortgage insurance. In most cases, I have no probs with paying lenders mortgage insurance to purchase a property, but if you've got a $250k line of credit then it might be worthwhile chipping in the additional 10% for the deposit.
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Jamie M wrote:Sounds fine – why not use the LOC for a 20% deposit? That way you can avoid paying lenders mortgage insurance. In most cases, I have no probs with paying lenders mortgage insurance to purchase a property, but if you've got a $250k line of credit then it might be worthwhile chipping in the additional 10% for the deposit.
Jamie
I'm actually using the LOC for the full amount (100%), not just the 10% deposit – so no LMI at that stage as it would be fully financed via the LOC with no mortgage at settlement.
Was intending to then get refinanced with a standard IP loan later down the track, after I have lease ageements in hand (probably a few months or so). I thought it would be harder to refinance without a lease and I can't get a lease until well after settlement, due to reno's needed. I would then put the 80% back into the LOC after refinanced to use on the next purchase.
In fact, depending on the bank valuation, I suppose it may be possible to put the full amount back into the LOC due to purchasing underpriced in the first place? Is that possible?
Hope that explains more completely.
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