Acessing Equity

[JohnA]

I need to access the equity in my PPOR so I can buy the next IP. Value 600k Owe 210k (P&I) wish to access the 270k. Bank is ANZ. I also wish both the 210 and 270k to be IO.
Bank manager wants to do a top up for the 270 set up as a LOC. (My accountant advises not to use LOC set up if possible).The bank manager thinks it is silly for us to take out a 480k loan - pay out existing PPOR loan to set a split up with the same amount. So he wants to do it his way.

The set up I think I need to ask for is 1x 480k loan split into 2 - a PPOR IO loan of 210 with offset and a IP 270 split IO with offset.

Is this correct?
Can ANZ do this?
If the bank manager won't - then I go elsewhere?

Thanks

 

[Shahin_Afarin]

awesome - ANZ does upfront vals and they also do system vals which generally come out a bit higher (depending on the property). So start there and order the upfront vals to determine exactly how much equity you have.

assuming its $600k - @ 80% LVR you have $270k in equity so it should be ok. Keep the loans separate and do it as a standard var. Not sure why the BM is pushing for a LOC - it is not necessary here (then again he would have far more information than me).

The only thing to note with ANZ is that they go to 70% max LVR if you are planning to put more than one dwelling on the property/title. This is a major show stopper with them.

 

[Peter_Tersteeg]

It looks like you're generally doing the right thing, but I wouldn't want to use ANZ's LOC product either; simply for the reason that it's damn expensive. A simple interest only variable investment loan will do the job just as well and cost substantially less.

 

[Aaron_C]

LOC is too expensive, get a term loan instead as per normal and shove the excess cash back into it for redraw.

 

[Rolf Latham]

im also not big fan of LOC

for other reasons

Most LOCs have a "repayable on demand" clause

ANZ could do whatyou you ask them no probs.

if not there are lots of lenders that will gladly provide the loans


ta

rolf

 

[JohnA]

Thanks for the replies.

Do I just take out a loan for the 270 with an offset

or do I push to ask for a 480 with 2 splits because I want both to be interest only?

 

[Rixter]

I prefer to use LOC's.. Separate ones for personal & investment use though for accountancy purposes.

The rate difference is minimal and I find it a far simpler financial structure to use compared to IO with offset.

The only time I would suggest using IO with offset would be if there is any chance of you converting your PPOR to an IP some time at a later date.

I hope this provides another perspective.

 

[Rolf Latham]

Thanks for the replies.

Do I just take out a loan for the 270 with an offset

or do I push to ask for a 480 with 2 splits because I want both to be interest only?

If thats what you need then dont settle for anything less.


ta
rlf

 

[Terry_w]

I'vE just assisted a client do similar with Anz.

Would recommend you use a loc to access equity. If you with money and park it in an offset account then the interedt will NOT be deductible.

You want to do it this way I suggest you apply for a private ruling with the ATO.

 

[JohnA]

The 270 will be parked in the offset until used for IP deposits. The original purpose of that 270 loan is for investment. Why would the accountant advise this set up if interest is not deductible?

The original PPOR loan was 225. The 270 equity being accessed was not originally borrowed money. It is our cash.

 

[Terry_w]

The 270 will be parked in the offset until used for IP deposits. The original purpose of that 270 loan is for investment. Why would the accountant advise this set up if interest is not deductible?

The original PPOR loan was 225. The 270 equity being accessed was not originally borrowed money. It is our cash.

THe money is being borrowed to park in a savings account. No connection with the borrowing and the investing.

 

[Peter_Tersteeg]

THe money is being borrowed to park in a savings account. No connection with the borrowing and the investing.

You park the money in the redraw facility of the loan account, not an offset.

 

[Terry_w]

You park the money in the redraw facility of the loan account, not an offset.

That would be ok as long as the money never passes via a savings or offset account.

 

[JohnA]

Looks like I need clarification from my accountant.

What is the purpose of an IP loan with an offset account attached then?

 

[JohnA]

Just checked through my accountants instructions. Yes PT he says park the money in the redraw.

 

[Terry_w]

Looks like I need clarification from my accountant.

What is the purpose of an IP loan with an offset account attached then?

ASk your accountnant has he heard of the 2004 AAT case of Domjan.


PUrpose of an offset account is to keep cash to save you interest not as a storage facitlity for borrowed money

 

[Peter_Tersteeg]

Looks like I need clarification from my accountant.

What is the purpose of an IP loan with an offset account attached then?

You have an offset account for the purposes of parking income such as your salary or rent. If you have non deductable debt, you put the offset account against that debt. In the absence of a loan against a PPOR, you put it against an IP loan.