Close down PPOR redraw to borrow more?

Situation: I have $200k available for redraw in my PPOR Westpac loan. The loan is $0 (paid off). I'm get a pre-approval from Macquarie for IP2. They say I can borrow $500k without closing down the PPOR loan. I want to borrow under $500k anyway

Question: Should I:
1) Keep the PPOR loan open so I can access my $200k as back up/cash reserve?
2) Close the PPOR loan, see if I can borrow the maximum with Macquarie so I have max funds for investing before going on maternity leave?

I hope that makes sense. Thanks.
 
Since it is paid off you could redraw and use this to invest.

Therefore closing one to increase the other is the same, except if there is a rate difference or a product difference.
 
Why not maximise the loan against your PPOR first if you need funds for investing post-mat leave? Loc or redraw no difference in that situation.
 
So, in basic terms (because I'm not very financially savvy with all the terms):

- Close off PPOR loan with Westpac
- Borrow the $200k as a LOC from Macquarie.

Benefits:
- I will access a lower rate (yes, I've confirmed this)
- I will have funds in LOC ready to use which I could perhaps not borrow while my salary is $0 on maternity leave.
- I can use the LOC funds as cash reserve just like I could have with the PPOR redraw??

Thanks
 
I'd leave it with the two lenders - I can't see any huge benefit in closing down your WBC loan in order to obtain the same thing with Mac....seems like an unnecessary process.

I'd just use whatever portion you need to from the WBC loan to get this next IP purchased (I assume it's 20% plus costs) - and keep the rest in redraw for later use. If this loan is set up as interest only you won't pay interest on the funds that are left over.

At least you know the properties aren't going to be crossed up either.

Cheers

Jamie
 
Jamie M,

My only issue is.... isn't my PPOR loan non-deductable? My aim of moving it over to the LOC would be so I can use it as deductable money without mixing up personal funds. Am I missing something (probably!)?
 
Jamie M,

My only issue is.... isn't my PPOR loan non-deductable? My aim of moving it over to the LOC would be so I can use it as deductable money without mixing up personal funds. Am I missing something (probably!)?
Yes, you are mssing the part Marty mentions.

Becareful as if you change to a LOC and use this for the PPOR or personal expenses and then for investing you will have created a mixed purpose loan
 
Something I might not have mentioned: I don't use my PPOR loan at all. The loan was for $200k. I have $200k sitting in there in redraw. The balance is $0 and it has stayed frozen like that for a year or so. I have another $100k currently sitting in my investment property offset. That's the money I actually use day to day.

So, I thought closing the PPOR loan would give me an additional $200k in investment loans to play with? I'm daft. I'm probably still missing something! hahaha.
 
Something I might not have mentioned: I don't use my PPOR loan at all. The loan was for $200k. I have $200k sitting in there in redraw. The balance is $0 and it has stayed frozen like that for a year or so. .
You did mention that in the first post.
 
Great. I'll just go with the fact that I'm dumb :)
No clearly not!

In conclusion then you should be fine to redraw using the existing loan for investment purposes and then claim the interest on that loan ongoing. Just don't redraw using the same loan for non investment purposes. Of course I'm not an accountant, seek advice and all that.
 
Great. I'll just go with the fact that I'm dumb :)
Nah not at all.

If that loan you're redrawing from isn't IO then it could be best to set it up that way.

A lot will come down to whether you intend to buy another PPOR in the future and/or if you're disciplined with money.

Cheers

Jamie
 
Ok cool. Starting to make sense. Thanks guys.

I am disciplined with money (without being tight) and we aren't moving (hopefully ever!). We love our house in Torquay and it's big enough for growing family needs.

So! I'm going to check Hadfield, Glenroy and Epping this weekend. Someone mentioned I should check whether a trust should be set up. I have no idea. I just know I need negative gearing to afford this stuff. I guess I better find out! BORING!!! :)
 
Keep the Westpac loan open. Given you've paid it off, it can be used for a deposit source and be fully tax deductible as long as you're prudent with how you go about using the funds.

Aaron has raised an interesting point about increasing the Westpac loan. Normally I might not suggest this, but a small increase to a limit of $250k would give you better rates with Westpac and wouldn't affect your borrowing capacity on the other side too much.

Without knowing your financial circumstances, it's hard to make a judgement on your borrowing capacity overall, but I suspect you can probably get more than $500k from a second or even third lender if you're strategic in your borrowing. Often lenders will look at a fairly simple scenario when determining how much they'll lend. They don't usually forward project the influence of additional properties in the mix.

In any case, the ultimate answer will depend on what sort of properties you purchase and what their actual rental yields are. It could be more, but it could also be less if you're personally finding cash-flow tight whilst on maternity leave. I wouldn't put too much stock in the $500k figure at this point.
 
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