Can you & Would you

[Brett IP]

Good Afternoon

Looking at one of 3 options, one of which I dont know if its even possible (#3) BUT which sounds the best if it is.

Our Current IP is worth approx $700k with $450k loan. This is only a short term IP as we will be moving in to this within 12 - 18 months, making it our PPOR, & renovating it to become our palace for many years to come.

Our Current PPOR is on the market and will sell for, lets say, $450k (after fees) & has a $300k loan.

Now, once this sells we are purchasing another house (lets say $450k value)to use as an investment, however we will live there for the first 6/12 months to save on stamp duty & renovate it a little to hopefully return better rent.

The question is, with the $150k cash we will have available from the current sale, would you;

1 - Use $90k for a 20% deposit on the next house so that the loan is only 80%, avoiding LMI? , OR

2 - As we are moving in to it for 6 or 12 months we can borrow 95%. However we will have to pay LMI + 5% upfront, OR

3 - This is the "can you" & "would you" question, would you pay $150k off the $700k house, reducing the loan to $300k, then take out a new loan against the $700k house for $90k, which will be the 20% deposit for the house were buying, and then borrow the 80% in a seperate loan.

This has the effect of avoiding LMI & allowing a tax deduction on 100% of the property whilst also leaving 100% of the cash available to be put against the non-deductible debt.

Just sitting at work thinking of some options to BEST set everything up for the future & after your thoughts?

 

[The Y-man]

3[/B] - This is the "can you" & "would you" question, would you pay $150k off the $700k house, reducing the loan to $300k, then take out a new loan against the $700k house for $90k, which will be the 20% deposit for the house were buying, and then borrow the 80% in a seperate loan.

Why not put the $150k into the ppor loan, then just draw down the entire $450k to buy the IP?

The Y-man

 

[Brett IP]

Hi Y Man

With the $150k already paid on the loan for the $700k house, it would then be a $300k loan. There isnt enough there to redraw $450k.

Cheers

 

[The Y-man]

Hi Y Man

With the $150k already paid on the loan for the $700k house, it would then be a $300k loan. There isnt enough there to redraw $450k.

Cheers

Oh right, sorry.

But you could draw down $260k towards your next IP then? (keeping your PPOR at 80% LVR)

The Y-man

 

[skater]

Good Afternoon

Looking at one of 3 options, one of which I dont know if its even possible (#3) BUT which sounds the best if it is.

Our Current IP is worth approx $700k with $450k loan. This is only a short term IP as we will be moving in to this within 12 - 18 months, making it our PPOR, & renovating it to become our palace for many years to come.

Our Current PPOR is on the market and will sell for, lets say, $450k (after fees) & has a $300k loan.

Now, once this sells we are purchasing another house (lets say $450k value)to use as an investment, however we will live there for the first 6/12 months to save on stamp duty & renovate it a little to hopefully return better rent.

The question is, with the $150k cash we will have available from the current sale, would you;

1 - Use $90k for a 20% deposit on the next house so that the loan is only 80%, avoiding LMI? , OR

2 - As we are moving in to it for 6 or 12 months we can borrow 95%. However we will have to pay LMI + 5% upfront, OR

3 - This is the "can you" & "would you" question, would you pay $150k off the $700k house, reducing the loan to $300k, then take out a new loan against the $700k house for $90k, which will be the 20% deposit for the house were buying, and then borrow the 80% in a seperate loan.

This has the effect of avoiding LMI & allowing a tax deduction on 100% of the property whilst also leaving 100% of the cash available to be put against the non-deductible debt.

Just sitting at work thinking of some options to BEST set everything up for the future & after your thoughts?

What I would do is get a separate loan on the current IP for $110k, giving you a total of 80% borrowing on this property. Meaning you have two loans on this one property. Make sure you have an offset account available.

Then, I would use these funds as the deposit for the next property. While you live there it will not be tax-deductable, but it will when you move out.

With the funds from the sale of the other property, I would put them into the offset of whichever home you are currently living in. This will preserve the debt on whichever you choose to be the IP and minimize the debt on whichever you choose to live in.

 

[Brett IP]

Thanks Skater, thats what I am looking at doing, time to check it out with the bank.

I also wanted to keep as much cash as possible so that we could buy another IP early next year.

Cheers