Advice on tax deductability

[iamjames]

I currently own four IPs with four loans all through the same bank (St George) and which are cross collateralised.

I want to buy another IP, but this time use another bank, so that all my finance isn't tied up with the one lender.

To do this I need to borrow about $60k for the 10% deposit on the new IP. So I am planning to establish a secondary loan attached to one of my current loans with St George. Once I have the 10% I can then borrow the other 90% from another lender and avoid LMI.

My problem is that St George won't lend just for the deposit even though I have plenty of equity. (They don't want me using another bank).

So I have to go through the process of claiming I want a loan for personal reasons (e.g. holiday, boat, car, whatever ) and use it for the deposit anyway. If I do this is the loan tax deductable?

Can you think of other ways to get around this problem?

This is a very annoying situation and would appreciate your expert opinion.

Thanks

James

 

[rugrat]

I am not sure.

But which bank is offering a 90% loan without LMI? I thought anything over 80% got you hit up with LMI.

 

[VYBerlinaV8]

Tell the bank whatever you want, it doesn't impact the deductibility of the loan.

Years ago I rang the bank and asked for a personal loan of 8k to close a property sale. They told me they didn't lend for that purpose. I said "no probs, thanks anyway" and hung up. Rang back immediately and got another call centre operator, and asked for a loan of 8k to take the wife on holiday. No problem, sir...

So I got the cash, closed the deal, and 5 weeks later paid out the loan. Easy!

(and the bank was St George!)

 

[Corsa]

So I have to go through the process of claiming I want a loan for personal reasons (e.g. holiday, boat, car, whatever ) and use it for the deposit anyway. If I do this is the loan tax deductable?

Dear James

If you obtain a loan through St George or another bank and you cite the reason for the borrowings as being "personal" then this basically means the bank will assess your ability to repay the loan (the Debt Servicability Ratio) and your LVR (Loan Valuation Ratio). They will use your existing loans to secure your new loan which will enable you access to home loan rates and you should ask for a "Top up loan" hopefully against 1 of your lowest LVR properties or worst case against all properties (the cross collaterisation you have is not the best set-up). They will hopefully give you the loan on this basis.

Then if you use this "Top Up Loan" to put towards your New IP - then the Top-Up loan will be deductible.

This will be irrespective of what you have told the bank the purpose of the loan is.

Hope this helps.

Best Wishes

Corsa

 

[Qlds007]

Tell the Dragon that you want to set up a LOC for investment purposes and if they say no tell them you will do the new investment loan with them if they waive the condition under the Advantage Package that all loans have to be crossed.

When they say "They cant do that" tell them thats why you are going elsewhere and if they refuse to consider the LOC start taking away 1 deal at a time.

Just be careful as i have an new client who is in the same postion with you with SGB and they have started telling him if he refinances they want their loan reduced.

 

[Bradsdad]

I currently own four IPs with four loans all through the same bank (St George) and which are cross collateralised.

I want to buy another IP, but this time use another bank, so that all my finance isn't tied up with the one lender.

To do this I need to borrow about $60k for the 10% deposit on the new IP. So I am planning to establish a secondary loan attached to one of my current loans with St George. Once I have the 10% I can then borrow the other 90% from another lender and avoid LMI.My problem is that St George won't lend just for the deposit even though I have plenty of equity. (They don't want me using another bank).

So I have to go through the process of claiming I want a loan for personal reasons (e.g. holiday, boat, car, whatever ) and use it for the deposit anyway. If I do this is the loan tax deductable?

Can you think of other ways to get around this problem?

This is a very annoying situation and would appreciate your expert opinion.

Thanks

James

G'day James,


As mentioned, LMI will only be avoided id you borrow 80% or below. The idea of obtaining the 10% from St.George is still sound as you won't get a 100% loan elsewhere and even 95% is getting tougher.
Have you taken into account gov't fees, legals etc? If you don't have these funds you may wish to add them to the STG loan if you have sufficient equity.

The loan purpose shouldn't have a bearing but if you want is set up for investment purpose you could apply for a loan to purchase shares. just ensure you have the funds placed into a seperate account that doesn't have PNL expenses coming out of it or look at taking the loan out as a LOC.
if enogh equity is available you could look at taking the 20% from STG plus costs which would then save LMI with the new lender.

I would chat to a MB to ensure you have the strucure right.


Regards
Steve

 

[peastman]

What if you refinanced one of your properties that has a fair bit of equity with your prefered new lender and then use some of that equity as deposit for your next IP. Does that work? It means you will have 3 IPs with StG and 2 with new lender.