Hello,
With the help of other forumites I have recently changed my PPOR loan to a IO with Offset. Property value $420k loan $302.
I wish to obtain the maximum loan approval prior to any tighening and any potential change in my employment situation. The intention is to purchase an IP when the time is right, but not immediately.
I have spoken with my bank manager about doing a second loan on the PPOR. I.e. the current IO loan of $302 and a secondary LOC for the max amount allowable which she tells me is about $18k… does that sound right?
I am seeking advice about making sure she gets the set up correct. If I plan on using the funds from the LOC for an investment property in future, should this amount be secured by my current PPOR. Would it be possible for me to get the LOC loan without securing it against my home (no other assets)?
These funds are also to be, in the short term (while I build funds in my offset) a back up insurance against un expected unemployment etc. If prior to purchasing my IP I had to use these funds for a safety net I am of the belief I would need to pay out this loan and cancel it then start another one for the IP so as to avoid any tax deduction issues… is that right?
Thanks for reading. Looking forward to your wisdom.
Hi Intrigue
Which bank are you with?
Most lenders will allow you to refinance up to 90% of the value of the property (some LMI is usually payable).
If you're worried about structuring it right (which is a valid concern), why not use a decent broker who'll strucuture it for you correctly? That way you don't have to worry about the branchy stuffing up the structure (which happens).
I'm not suggesting that the decent broker be me – but there's compotent brokers on here who'll sort it out for you.
The $18k doesn't sound right. It doesn't even equate to 80% LVR. Did they tell you how they came to that amount?
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]
You need a decent broker, but may also need tax advice.
eg. If you are planning on moving out and renting that place you may want advice on using the LOC to pay the loan and costs on the current PPOR while building up cash reserves in a offset 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
Hi guys,
When accessing equity in one property as deposit for other IP's is there a problem using just one LOC to fund the deposit for multiple IP's? Or should you take several loans, one for each new property?
Regards,
Andrew
itsandrew
Go as far as you can see and you will see further.
Good morning and thank you for your comments.
I am financed through NAB and I will have a chat to find out how they calculated my available borrowings. It's such a shame you really have to dig for details, they just say yep sign the form and we'll get it done.. get what done, how much can I borrow, whats the rate, what secure's it etc… arrgh (I kinda like tormenting the girl though, I swear I must be the only one that ask questions)
My suspicion about the amount and thoughts about using a broker from this site perhaps relate to the same issue (will have to investigate). My PPOR is in an area that is zoned rural and thus lending differs. I went to NAB in the first place because the local branch were able to vouch for the fact that although the area is still zoned rural it is a residential area, thus we seem to be able to get approval for higher LVR lending (NAB were the only bank that were willing to do this). My concern Jamie M is that if I asked you to do the brokering for me you would likely hit the wall with NAB based on the rural zoning?? unless working with a local branch manager??
Hi Intrigue
CBA can be pretty good with rural residential. The other day I had a client who required a 90% lend for two dwellings on the one 40 acre block – CBA were willing to look at it.
How big is the block? From memory, I think CBA will go up to 40 hectares (or 100 acres I think that equates to).
I understand your frustrations with your current bank. I hear similar stories all the time.
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]
Hi Intrigue,
Terryw’s advice is right on the money. Talk to an accountant, and have them recommend a local finance broker.
Talking to your local branch is tricky, they’re representing the interests of the branch, not yours. Also, unfortunately they often have no training nor experience whatsoever, aside from a 2 week crash course in filling out the loan application form on your behalf. You said yourself your “seeking advice to make sure she gets it set up correct”. You simply shouldn’t be put in that position, the branch will receive a (considerable) commission for organising finance for you. And what exactly are they doing to earn it? filling out the form for you? In talking to a broker your assured of a certain quality of service.
Re the tax side of things, your on the right track. Build funds in the offset, pay the interest from the LOC.
Thanks.
My other concern re: the broker is that I am not sure there is any money in it for them.
As I am under the NAB choice package it does not cost me anything to do this loan (I pay an annual service amount). Therefore I am unsure if there are commissions payable.
Could the brokers out there please confirm for me that if I ask for you to do this for me that there will be funds in it for you?
Im not a broker… but they get commission for any finance they organise for you. Usually a finance broker is only too happy to give you some advice in anticipation of being able to organise finance for you in the future. If you call a broker you can always ask them what their fee structure is.
Hi Intrigue
Most of us get paid a comission from the lender – so it doesn't cost the client anything. That's how my business operates.
Some brokers charge a fee for service.
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]
itsandrew wrote:Hi guys,When accessing equity in one property as deposit for other IP's is there a problem using just one LOC to fund the deposit for multiple IP's? Or should you take several loans, one for each new property?
Regards,
Andrew
HI Andrew
Generally no issue with using one LOC. As long as all interest is deductible you can just apportion it between the properties – even if you get the portions wrong the overall deductions should be the same.
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 Terry,
Andrew
itsandrew
Go as far as you can see and you will see further.
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