How should I structure my loan?

Hi Anne

Firstly welcome to the forum and I hope you enjoy your time with us.

There are many consideration before going ahead and just doing this.

Remember interest on a redraw which was originally a PPOR is not Tax deductible so that course of action is not wise.

Do you own the property alone or jointly?

What marginal tax rate are you on? etc etc

All of these points need to be worked out prior to making the move.

Your mortgage broker should be able to give you some suggestions and alternatives.

Cheers

Yours in Finance 

Ok depending on what State you are in you have a couple of options:

1) Selling the property to a Unit Trust structure with you holding 100% of the units. Borrow 100% of the market valuation and use the funds to pay down the existing debt of $70K. Balance of funds circa $230K can be used as deposit on the new PPOR.

100% of the interest on the $300K loan now becomes deductible interest however the downside is that you may incur Stamp Duty on the Transfer. Holding the property in Trust may incur Land Tax depending on the State location.

2) Claim the interest on $70K only. Switch the loan to interest only and take out a sub loan on the security of the PPOR to fund a 20% deposit and acqusition costs.

Take out a separate loan with alternative lender secured against the new PPOR.

Of course if you go route 1 you need to compare initial costs with ongoing savings and look at the time you believe you will hold the IP current PPOR. No point in costing you $20K stamp duty and getting your money back over say 2 years if you then decide to sell the property in Year 3.

Cheers

Yours in Finance

Hey I am not fully sure but I think the lender will want to look over your credit report, your employment history, your income, and the amount of debt you are carrying. Lenders will also look closely at available cash. This is where things can change in your favor. If your credit rating is low, you will typically need to have much more available cash to compensate.