Any chance of using IP to purchase PPOR?

[testingw00]

Hey Guys,

There's heaps of talk on the this forum about how to fund the purchase of IPs.

However, I've just recently purchased my very first property which is an IP under my name but would like to buy a PPOR within the next 1-2 years.

What would be the best strategy to achieve this?

Some background information for you...

I've only just begun the repayments for the IP (purchased in January) and am currently living in it for the first 6 months to satisfy the FHOG (NSW) and will rent it out afterwards. The loan I took out is IO for the first 2 years then it will become I+P thereafter (Bankwest).

In the mean time, my partner and are aggressively saving up as much money as possible - which involves taking a lifestyle hit and cutting back on expenses wherever we can.

I am very new to property investment and purchasing so any help is greatly appreciated.

Cheers.

 

[Rolf Latham]

Hi TW0

welcome !

We would need some numbers, like value of place, current loan etc pls
ta

rolf

 

[testingw00]

Hi Rolf,

Ahh, of course.

Purchase price of IP is $320k.
Currently owing $285k.

No offset account attached to the loan but redraw is available.

I've put down a 10% deposit of my own savings to make this purchase.

 

[bluestorm]

I suppose the smart thing to have done would have been to use the FHOG for what it was intended for, and that is your PPOR. Then get an IP later.

You have decided to do it around the other way. At 90% LVR on your IP currently, there is virtually no money to use from your IP, and in 1-2yrs with a flat market currently, will not likely be much better in 2yr time.

Your only real option is not to pay down any of the principle in the IP, and start saving like crazy for your PPOR. Your effectively starting your saving from scratch for your PPOR.

If you were to put extra money into the IP, and then use it for PPOR, that portion would then become non-tax deductible.

 

[Marty McDonald]

You should set up an offset account linked to your loan if at all possible and then save as much as you can into the account. Then just keep saving and review in 2 years time.

 

[Rolf Latham]

In times of strongish growth ( say 10 % pa) ur current PPOR culdbe worth 387 k

90 % of 387 = 348 300,

You currently owe 285, so subject to lender rules and serviceability you can get a separate loan of 63k

That 63 may be enough for the next purchase deposit and costs.

This is a concept known as leap frogging

ta
rolf

 

[ozmale42]

You should set up an offset account linked to your loan if at all possible and then save as much as you can into the account. Then just keep saving and review in 2 years time.

Good advice there....better than investing the money in a savings account/term deposit and receiving less interest than the interest you're currently paying on the IP loan.

 

[The Y-man]

No offset account attached to the loan but redraw is available.

Same outcome $ wise, BIG difference tax wise later if you want to use the money to buy PPOR.........

The Y-man

 

[Bradsdad]

Same outcome $ wise, BIG difference tax wise later if you want to use the money to buy PPOR.........

The Y-man

Totally agree. I'm hoping the original deal was done direct and not structed by a broker.