Advice on

Advice on loan structure

HI,

My wife and I have recently refinanced our PPOR in order to 1. complete home renovations and 2. purchase our first investment property.
We have been set up with the following loan structure:
520k loan, split into:
- 300k fixed Interest only loan
- 220k variable interest only loan
The 220k loan is split further into
- 70k (for 'personal' use - ie consolidating cr card debt, home renos)
- 150k for investment property deposit/purchase costs.
We also have an offset account, which the bank has currently linked to the 150k split.
At present, the balance of our loan after paying off the previous mortgage is sitting in the offset account.

I am wondering if we should keep the money sitting in the offset account, with it linked to the 150k split until we purchase the IP, then change the linked account to the 70k split (so its offsetting the interest on the 'non-deductible' debt), or if we would be better paying the 150k into the 150k loan then redrawing it when needed? I assume if we don't use the full 150k for investment, but some for personal use, the accountant will just need clear evidence for how we have spent the money in that loan?

Any advice is appreciated.
 
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always reduce/offset non-deductible debt - I would do that ASAP so you can claim the interest that is currently being offset.

Better to keep deductible and non-deductible separate to keep the account happy so they don't have to try and apportion things adding more time for them.

Careful of redrawing money and claiming tax on it too - I'll leave one of the accountants to comment further on that.
 
if the 70 k is drawn and and non deductible, link a transactional offset acct to the 70 k

then, pass all rental and income via that offset acct

if you can park the 150 back into the IP deposit loan, then do so.

who is the lender ?

ta

rolf
 
HI,

My wife and I have recently refinanced our PPOR in order to 1. complete home renovations and 2. purchase our first investment property.
We have been set up with the following loan structure:
520k loan, split into:
- 300k fixed Interest only loan
- 220k variable interest only loan
The 220k loan is split further into
- 70k (for 'personal' use - ie consolidating cr card debt, home renos)
- 150k for investment property deposit/purchase costs.
We also have an offset account, which the bank has currently linked to the 150k split.
At present, the balance of our loan after paying off the previous mortgage is sitting in the offset account.

I am wondering if we should keep the money sitting in the offset account, with it linked to the 150k split until we purchase the IP, then change the linked account to the 70k split (so its offsetting the interest on the 'non-deductible' debt), or if we would be better paying the 150k into the 150k loan then redrawing it when needed? I assume if we don't use the full 150k for investment, but some for personal use, the accountant will just need clear evidence for how we have spent the money in that loan?

Any advice is appreciated.

I can see 2 issues.

At present, the balance of our loan after paying off the previous mortgage is sitting in the offset account.
1. If the above means you borrowed money and parked in the offset account then you have issues

and

2. your offset account is attached to an investment property - do you have non deductible debt? It seems so
 
Hiya

Just to confirm.

Has the offset against the $150k loan been set up just to park the funds for that loan? Or is it the only offset account you have and you've got funds coming in and out of it?

The usual structure I set up is one offset linked to the non-deductible PPOR split. The equity release for IP purposes is usually an interest only loan with the funds placed back in the redraw facility to be used when required.

Cheers

Jamie
 
Thank you for your responses.
We have only just settled on the refinance and are yet to purchase an IP.
The 3 loans have been created and the funds leftover from the refinance have been put into the offset account.
The lender is Macquarie.
I'm assuming from your responses that the best course of action would be to -
1. Immediately Link the offset account to the 70k split.
2. Put the 150k back into the 150k loan intended for the IP deposit/costs until we're ready to purchase
3. Keep the remainder in the offset account, against our 'non deductible' split.
4. Try to maintain the 150k split as purely investment and the 70k for 'personal', putting all salary, rental income (when we start receiving it) through the offset account.

Does this sound right?
 
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