Finally After 2 years of research I’ve bought my first IP. I would also have to say big thank you to all the participants of this forum, I believe due to this forum I think I’ve got my loan structuring right or have I?
I’ve used the equity of my PPOR to by IP. Loan structure looks like this.
A= Existing PPOR has home offset account linked to it. (P&I)
B = Equity from PPOR has been borrowed as standard Resi Inv Loan (not LOC) with new offset linked to this loan (5 yr IO) (this loan used for deposit, stamp duty….etc)
C = Another loan 80% of property price borrowed as standard Resi Inv Loan secured against IP (5 yr IO)
Before Loan B was settling, my broker advised that I draw loan B and put it in my Home offset (But reading all the past forums it didn’t sound like right thing to do, so I created brand new offset account linked to Loan B and left all the money there, until I use money out of this offset for deposit). Have I done the right thing here?
Another question I have is for Loan B, after all the settlement finished offset account linked to loan B still has some excess unused money left. Now I do not prefer to have offset account linked to it to stay open (as it is costing admin fees). What are my options here take this excess money & put in my offset and proportionate every year at tax time OR leave the offset as it is for 5 yrs and then pay of that amount on Loan B, anything else…….
Note, all money from Loan B and C has been used only and only for investment. Who would have thought excess money from bank will cause me problem…..
Any thought/feedback/suggestions will be appreciated.
Thanks
S0805
Hiya
sounds good but a couple of comments.
– will PPOR ever become an IP? If so, I'd convert repayments to IO
– offset may not be the best place to park the equity release, consider placing it into the loans redraw instead.
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]
Thanks Jamie for your reply.
– currently there is no plan to convert PPOR to IP, in any case converting it to IO would be good idea if I suffer with serviceability
-i agree offset is not the best place to park the equity release…..Loan in question is IO only so can't put that into redraw until it becomes the P&I.
Just need to get your comment specifically on what should I do with with excess equity a) Park it into my PPOR offset and proportionate tax every year b) wait for 5 yrs IO to finish and park that money back into the loan (pay off the principal). This offset is costing me fees which I want to save…..
thanks
S0805
No worries.
I can't see why you couldn't redraw those funds unless the loan that's been set up doesn't have that capability.
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]
Sounds like you have borrowed money to invest in a non interest bearing savings account. Dangerous
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
Terryw wrote:Sounds like you have borrowed money to invest in a non interest bearing savings account. DangerousHi Terry,
Thanks for your reply. I am not sure about what you meant.
My intentions to borrow this money is only or investment, but after the settlement I found that bank has lend me more money so rather than mixing this money (which intention is for investment only), I opened another offset account to make sure they don’t get mixed anywhere. Do you think it is still dangerous?
If yes, then what should one do in situation, coz anyone using the PPOR equity to fund deposit for IP will face this, as equity loan (IO) will always settle earlier than IP loan. Where should one park money until the IP loan gets settled? I understand this will not be problem if LOC is used but it will for Standard Resi Inv Loan.
Thanks
S0805
Hi Jamie/PLC,
I am not 100% percent sure but will check with my broker if this loan has redraw facility or not. I’ve feeling that this was discussed with my broker during loan setup and I was somehow convinced not to go that path….anyway I’ll check that again.
Please correct me if I am wrong the way redraw work is like this e.g. Loan of 60K has 5K in redraw then bank will charge me interest on 55K.
Also, I think I’ve to be careful if I ever take the money out of redraw as it needs to be only used for investment purposes. (like for second IP)
If in future I need to fund my second IP, is it possible that I ask bank to release the available equity of this loan (which is equity of PPOR) and place it in redraw. Can that work?
Thanks guys
Yes, yes and yes if set up as a separate loan split.
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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