I have an opportunity to purchase IP2.
My current situation is:
– IP1 secured against title for PPoR with CBA (IO+MISA). (investment loan is $367k, offset containt $110k, security valued at 1.1million). So very low LVR.
– We hold IP1 title.IP2 valued at 1million.
Options for finance are:
1. New investment loan with CBA, cross co-lateralise PPoR title with IP2 title. Upside is I still hold the title to IP1.
2. New investment loan with another lender, co-lateralising IP1 title and IP2 title. Upside is my PPoR title is not cross co-lateralised and is held for security at a very low LVR.IP1 is in join names, IP2 will be in my name only.
What are the pros and cons to each, and what would you do?
Any advice appreciated.
Hi Paullie
Sounds like a messy structure to me – this will sound bias but your best bet is to touch base with a decent broker to work through this.
From the info provided, I can’t see why any security needs to be crossed.
Cheers
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]
Totally agree with Jamie i fail to see why you would want to cross any of the securities.
Seems adequate equity and serviceability in each deal to be standalone.
Why not shoot Jamie a quick line and get him to structure it for you. Will cost you nothing and you will get it done properly.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
But how can I obtain a second investment loan with another lender without firstly using the ivenstment property as security plus 20 to 30% deposit, in the form of equity on IP1?
I dont want to move the 110k cash I have in the offset on IP1 because I dont get full negative gearing benefits from that loan.
Also, I do have a broker but havnt spoken with him as of yet as I like to educate myself.
Hi Paullie
No need to use the WHOLE property as security for the next. You just need to tap into enough equity that will cover the 20% deposit plus costs.
This blog entry (while not directly applying to your situation) might help – "how to use equity in your home to purchase an IP"
Cheers
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]
Is this articale suggesting I increase my IP1 loan wo cover the deposit and buying costs of IP2, then the bank will simply hold IP2 title as security?
Thus I keep IP1 title.
Im I getting that?
If I do that then I reduce my negative gearing capability in IP2 as it will only be in my name, and I am the sole bread winner paying 80k+ tax a year.
No that is incorrect as the Title defines who claims the Tax deduction and not who borrowers the money.
I hate to say it doesnt sound like your Broker has any idea on loan structure as Jamie initially mentioned it is a bot of a mess.
There is a couple of ways you could maximise your deductions and simplify your structure.
Must admit i am a loss why you would want to have a Bank hold your PPOR as security when they dont need to.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Paullie wrote:I reduce my negative gearing capability in IP2 as it will only be in my name, and I am the sole bread winner paying 80k+ tax a year.However you structure it, you should end up with the same amount of debt, paying the same amount of interest, set against the same amount of income.
Qlds007 wrote:No that is incorrect as the Title defines who claims the Tax deduction and not who borrowers the money.I hate to say it doesnt sound like your Broker has any idea on loan structure as Jamie initially mentioned it is a bot of a mess.
I'd really think about seeing an accountant also…
I havnt spoken to my broker yet.
Im the one who is learning.
Jamie, do you mind if I contact you for some advice?
Also, I had to use my ppor as security for ip1 because i had no deposit, all my money was tied up in equity in my ppor.
Paullie wrote:Jamie, do you mind if I contact you for some advice?No worries at all. All my details are below – call or email, whichever is easiest for you.
Cheers
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]
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