Best finance options - opinions wanted please

[wagnman]

Hi all.

My wife and I are buying an IP and we are faced with a couple of options as to how we do it. The situation is as follows.

PPOR in wifes name (for asset protection reasons) estimated value $400 - $450K with $280K owing on mortgage.

IP purchase price $299K to be purchased in my name for tax reasons.

Now at the moment we have $30k offset against the variable portion of the PPOR mortgage which at the moment we are paying the minimum off the PPOR mortgage and an extra $1K per week into the offset account.

What I want to know is this.

Because I am getting the finance in my name only for the IP and we do not want the PPOR and IP to be cross colateralised we can do two things. I can either get the $30K cash out of the offset and use it as the 10% deposit for the IP's IO loan.

OR

My wife can approach the CBA (which we have the mortgage on the PPOR with) and get a $30K IO loan from the equity in the PPOR which she would LOAN to me (for investment purposes) to use as the 10% deposit on the IP thus leaving the $30K cash in the PPOR offset account where we want it to stay.

What path do you all reccomend or is there another way of doing it that I have not considered?

All help greatly appreciated.

 

[Qlds007]

Certainly where possible do not use your own cash to put down as a deposit on an IP especially where you still have non deductible debt.

On the basis that your wife takes a loan out on the equity of the PPOR (assuming her income can support it) and loans it to you at the same interest as she is being charged her Tax position will be neutral.

As long as the mortgage documentation is in order between the two of you and a commercial rate is being charged you will be able to claim the interest as a deduction.

To avoid any cross guarnatees you maybe better of approach a separate lender all together. I assume that you did not guarantee the original PPOR loan.