No.
Richard Taylor | Australia's leading private lender
Can someone explain to me why as not to put the rents into the LOC ? I was planning on doing this to cover the monthly interest payment , or should i be putting rent s in another account then pulling the funds at the end of each month and paying the min monthly payment for LOC ..Confused now
Oh and this is negative geared at this satge of time
I explained it above:
Putting money into a LOC will save you interest but will cost you in tax.
Everytime you place money into the account it is a repayment of a loan. Everytime you withdraw money out it is new borrowings.
So if you put $100 in the LOC for one day and then take it out tomorrow to buy food the investment loan has decreased by $100 and the personal loan has increased by $100.
Imagine doing this every week for a number of years. You could have a $100,000 loan with none of the interest being deductible.
Whereas if you had used an offset account this could have been totally avoided – while saving you the same or more interest.
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
Ok Lots of different opinons here I will be speaking to our Accountant offset account seems the way to go with us our LOC is purely for the two IP's nothing else what so ever , Thanks for all the Info guys
Im a little confused still about paying the interest each month ie what funds do we pay this with ? Remembering we are running two negative geared IP's at this stageTerryw wrote:I explained it above:Putting money into a LOC will save you interest but will cost you in tax.
Everytime you place money into the account it is a repayment of a loan. Everytime you withdraw money out it is new borrowings.
So if you put $100 in the LOC for one day and then take it out tomorrow to buy food the investment loan has decreased by $100 and the personal loan has increased by $100.
Imagine doing this every week for a number of years. You could have a $100,000 loan with none of the interest being deductible.
Whereas if you had used an offset account this could have been totally avoided – while saving you the same or more interest.
Thanks for the info Terry, much appreciated
ahhhh lots of learning and research yet for me not to mention all the reading!!Hi Richard,
You mentioned that as long as you only use you PPOR equity to fund a LOC you'll be ok. Is it not ok to use your equity in an investment property? Or does that murky up your loans and create trouble down the track?Thanks!
Yes no dramas in using the equity in your IP although i prefer to use the PPOR as when we refi the IP loan and swing 100% of the debt onto the security itself it keeps in nice and clean.
Richard Taylor | Australia's leading private lender
Thanks RIchard.
I have another question about an LOC. When applying to your bank for one and they ask what the purpose of the LOC is, do you tell them that it is for investment purposes? Just wondering how much to let them in on!
Cheers,Tam
Hi Tam
Some lenders may have a problem with it
but your Broker should be able prepare the Credit
submission for you correctly. Remember most
Brokers do not charge any fees.Just be careful listening to the advice of your
Banker. I have a client here on Brisbane who went
to set up a separate loan on his current Ppor (to be investment property) with CBA.
They told him cheaper to make it 1 loan and by borrowing against the security of the IP
he would be able to claim the interest as a deduction.He now has a P & I investment loan mixed in with
a loan for his Ppor deposit. A total mess and wrong in so
many grounds.Simple answer don’t Tax or structuring advice from your Bank Manager.
Richard Taylor | Australia's leading private lender
Im a little confused still about paying the interest each month ie what funds do we pay this with ? Remembering we are running two negative geared IP's at this stage
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