why should you seperate your owner occupied home loan from IP loan?

Hi Nan,
I believe it is a good idea – mainly for asset protection. Imagine if you had a loan for your home for some years and you suddenly wanted to go buy an IP – AND got finance from your current Bank.

First, they OFTEN set things up so that the two loans are “crossed”. I have found you need to nip that in the bud when first seeking a loan. By using a different bank for the IP loan, this means the loans CAN’T be “crossed”.

Also, let’s say you did go ahead and borrow from your “bank of many years” for an IP loan too. And suddenly things go badly wrong, and the IP is suddenly not worth what you paid for it, AND your employment gets cut OR your job goes away !!

Things start getting a bit serious then. Now, with your “Bank of many years” holding both mortgages, there is a chance that they might want you to sell your HOME (as it has a lot more equity than the IP) to repay them for the IP loss. With a separate Bank, that could still happen, but it would likely take a while longer as they don’t have the mortgage on your home.

Really, I just like the idea that one bank looks after the loan on your home, and another bank(s) can look after the loans on IPs… and never the twain shall meet !! ;)

Benny

You don’t neccesarily have to use different banks – but you should certainly keep the loans uncross collaterised.

Do to that – you simply set up two loans against your owner occ (one for owner occ purposes and the other for the deposit/costs on your investment(s)

So if you were purchasing one IP for instance – you’d have three loans set up:

PPOR
Loan 1: Current loan
Loan 2: Equity release for deposit/costs on IP

IP
Loan 3: IP loan

All three loans can be with the one bank – or you could have loan 1 and 2 with one bank – and loan 3 with another.

Cheers

Jamie