Put extra $ into PPOR or IP?

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Henry Adams
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@henry-adams
Join Date: 2011
Post Count: 105
February 6, 2012 - 2:07 pm
Qlds007 wrote:
Reduce the repayment by switching to interest only.
Cheers
Yours in Finance
Hi Qlds007, by using IO loan for the PPOR, does that means we need to refinance it every 3 years or so when the IO promotion period ends ?
Richard Taylor
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@qlds007
Join Date: 2003
Post Count: 12,024
February 6, 2012 - 2:37 pm
No Henry get your Broker to roll it over to another IO period.
With the right lender it is a fairly simple process. With others it is a full application.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
booge
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@booge
Join Date: 2011
Post Count: 48
February 6, 2012 - 8:01 pm
As far as IO goes, at what stage do you pay down the principle? Or is it just left IO until you sell it? Always wondered what people did and why in this situation.
Jamie Moore
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February 6, 2012 - 9:54 pm
booge wrote:
As far as IO goes, at what stage do you pay down the principle? Or is it just left IO until you sell it? Always wondered what people did and why in this situation.
As Richard mentioned above your post – you roll it over into another IO term.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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Terryw
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February 6, 2012 - 10:41 pm
booge wrote:
As far as IO goes, at what stage do you pay down the principle? Or is it just left IO until you sell it? Always wondered what people did and why in this situation.
Its up to the individual. Some keeping rolling over indefinitely. Others like to pay off a main residence first and then start paying off the investments. Others just have PI on all loans (and lose a bit of tax).
But having IO for ever may sound crazy initially – but think back to your grandparents/parents property which they bought in Sydney in 1960 for $16,000. Now worth $1mil. Imagine if they borrowed 100% IO and kept it IO for 42 years. Today the loan would still be $16,000 with interest of about $1000 per year.
If they rented it out they may get $40,000 per year in rent!
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Henry Adams
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Join Date: 2011
Post Count: 105
February 6, 2012 - 11:03 pm
Jamie M wrote:
booge wrote:
As far as IO goes, at what stage do you pay down the principle? Or is it just left IO until you sell it? Always wondered what people did and why in this situation.
As Richard mentioned above your post – you roll it over into another IO term.
Cheers
Jamie
So the IO loan has other name called Revolving line of credit ?
Terryw
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February 6, 2012 - 11:15 pm
Certainly not!
Completelyy different products and you can get into a lot of troube by using a LOC.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Jamie Moore
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@jamie-m
Join Date: 2010
Post Count: 5,069
February 6, 2012 - 11:25 pm
Henry Adams wrote:
Jamie M wrote:
booge wrote:
As far as IO goes, at what stage do you pay down the principle? Or is it just left IO until you sell it? Always wondered what people did and why in this situation.
As Richard mentioned above your post – you roll it over into another IO term.
Cheers
Jamie
So the IO loan has other name called Revolving line of credit ?
No – they are different products.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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booge
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@booge
Join Date: 2011
Post Count: 48
February 8, 2012 - 11:44 pm
Had a phone call with a Mortgage Broker, the advice for me was to fix my IP mortgage with ING for 3 years at 5.99% paying interest only. Cost to switch the loan type is $250, I’m already with ING on a variable P&I.
Currently minimum payment per fortnight $596 P&I @ 6.62% variable
If fixed at 5.99% and interest only it would be $923 per month (monthly only)
It would free up just over $3000 per year.
I’ve also been advised via this forum (and another learned mortgage broker on here!) to put the extra $15000 available for redraw from the IP loan into my current PPOR home loan offset.
My accountant has advised me using the $15000 for the PPOR offset will not help for tax purposes and complicate tax more and not be advantageous.
Thoughts?
Paullie
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@paullie
Join Date: 2009
Post Count: 217
February 9, 2012 - 12:04 am
So your accountant believes increasing your deductible debt and decreasing your non-deductible debt will have no tax advantage?
If Im reading that correctly, you need a new accountant.
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
February 9, 2012 - 12:39 am
booge wrote:
Had a phone call with a Mortgage Broker, the advice for me was to fix my IP mortgage with ING for 3 years at 5.99% paying interest only. Cost to switch the loan type is $250, I’m already with ING on a variable P&I.
Currently minimum payment per fortnight $596 P&I @ 6.62% variable
If fixed at 5.99% and interest only it would be $923 per month (monthly only)
It would free up just over $3000 per year.
I’ve also been advised via this forum (and another learned mortgage broker on here!) to put the extra $15000 available for redraw from the IP loan into my current PPOR home loan offset.
My accountant has advised me using the $15000 for the PPOR offset will not help for tax purposes and complicate tax more and not be advantageous.
Thoughts?
I haven’t read the whole thread again. But if you are going to be borrowing money and placing it in an offset then the interest won’t be deductible. So I would agree with your accountant.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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booge
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Post Count: 48
February 9, 2012 - 12:46 am
Paullie wrote:
So your accountant believes increasing your deductible debt and decreasing your non-deductible debt will have no tax advantage?
If Im reading that correctly, you need a new accountant.
He had said “it would complicate tax more as he would need to start apportioning the interest claim on the rental loan.”
Even though it may complicate it more, i’d still like to know if it benefits me though.
Terryw
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February 9, 2012 - 5:22 am
booge wrote:
Paullie wrote:
So your accountant believes increasing your deductible debt and decreasing your non-deductible debt will have no tax advantage?
If Im reading that correctly, you need a new accountant.
He had said "it would complicate tax more as he would need to start apportioning the interest claim on the rental loan." Even though it may complicate it more, i'd still like to know if it benefits me though.
I can't see how it would benefit you.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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booge
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February 9, 2012 - 7:01 am
In terms of tax benefits, if it’s a case of more work for him I’m fine with that, so long as I get some financial benefit. Are there any good property accountants in Melbourne or eastern suburbs of Melbourne? I don’t feel totally confident in mine. I’ve been told in here chan and naylor are pricey, just after a fair price, not ridiculous.
Terryw
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@terryw
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February 9, 2012 - 9:40 am
booge wrote:
In terms of tax benefits, if it's a case of more work for him I'm fine with that, so long as I get some financial benefit. Are there any good property accountants in Melbourne or eastern suburbs of Melbourne? I don't feel totally confident in mine. I've been told in here chan and naylor are pricey, just after a fair price, not ridiculous.
The issue is not that it will be more work for the accountant but general tax deductibility.
Say you borrowed $15,000 from a separate bank as a personal loan and put the money into your offset on your home loan – could you claim the interest on the personal loan in this case?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Mayuran
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@mayuran
Join Date: 2010
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February 9, 2012 - 11:31 am
booge wrote:
I've also been advised via this forum (and another learned mortgage broker on here!) to put the extra $15000 available for redraw from the IP loan into my current PPOR home loan offset. My accountant has advised me using the $15000 for the PPOR offset will not help for tax purposes and complicate tax more and not be advantageous. Thoughts?
Hi Booge I had this confusion before as well – even though you are withdrawing the excess money you paid into you IP loan , as far as ATO is concerned, it is a new borrowing. purpose of this borrowing is reduce your PPOR loan not investment . hence interest portion of the 15000 is not tax deductible. Your accountant is right – you dont have extra benefit in doing this and it will complicate the tax return as well.
booge
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Post Count: 48
February 9, 2012 - 9:02 pm
The frustrating thing about this situation is that no matter who i ask, I’ll get a slight variation in advice. My plan/advice initially was to redraw the $15K to maximise the loan on the IP and go interest only. So the advice now is to just leave it there?
Also, the mortgage broker has advised to fix my investment loan at 5.99% for three years and pay interest only, of course now I’ve read about the dangers of fixing investment loans!! What the hell do i do??
Jamie Moore
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Join Date: 2010
Post Count: 5,069
February 9, 2012 - 9:14 pm
booge wrote:
Also, the mortgage broker has advised to fix my investment loan at 5.99% for three years and pay interest only, of course now I've read about the dangers of fixing investment loans!! What the hell do i do??
Don't do something you're not comfortable with doing. Your broker should be matching products to your needs – not trying to push you into a loan that's not right for you. Apart from fixed rates being quite low at the moment – was there any other basis for the broker to recommend fixing?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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booge
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February 9, 2012 - 9:35 pm
It was purely based on the rate being the lowest he could find. I’d prefer not to fix to avoid break fees just in case i get professional advice that may lead to a restructuring of finances if i want to purchase in the next two years.
Richard Taylor
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@qlds007
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Post Count: 12,024
February 9, 2012 - 9:51 pm
booge it is simple your Broker is acting on your behalf.
If you dont want a fixed rate you tell him "I dont want to go fixed".

If he argues any more dump him and ring Jamie.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender