Finance/loan Structure - Planning for the first IP

[neesh790]

Hi All,

I'm hoping to get some feedback/suggestions from the experts/experienced investors..Planning for the First investment..so I want to do it right

Current Situation
- PPOR1 Bank Valuation 400K with ANZ
- PPOR1 loan of 300K
- Offset Account of 100K

Strategy:
- Remain in PPOR1 for the next 10 years and then upgrade to another PPOR2 and convert existing PPOR1 into an IP
- Also buy an IP within the next few months

How do I structure my loan to achieve my goal of upgrading to PPOR2 in the next 10 years and buy IP in the meantime?

(a) Pay the 100k from offset into my existing loan which reduce my PPOR1 Home loan to 200K and I can then release equity 120K as a deposit to purchase the IP?

(b) After 10years, what are my options to upgrade to the PPOR2? Note: I do not plan to sell property. However, I need to maximise cash for the PPOR2 to minimise repayments (Cannot afford huge debt)

Any thoughts/suggestions welcome
Thanks in advance!

 

[Jamie M]

Hiya

Based purely on purchasing another PPOR later you'd:

1. Keep current loan as IO and pump money into offset instead of the loan.

2. Use offset funds for new PPOR purchase in 10 years.

If you want to buy an IP soon - just make sure if you're using equity that you set up the equity release as a separate loan to your current home loan.

Cheers

Jamie

 

[neesh790]

Thanks Jamie!

Could you pleaae provide an example "you set up the equity release as a separate loan to your current home loan"?

Also what are my options after 10 years? Refinance?

 

[Peter_Tersteeg]

You can use the equity in your IPs to assist with a deposit for other property (including your own home). You need to access this equity via a separate loan account, as you don't want to mix loans for investment (tax deductible) and your home (not tax deductible) in the same account.

Ideally though, you'd save as much for PPOR 2 via the offset account as Jamie suggested over the next 10 years. Hopefully this will supply your deposits and minimise the loan for that property when the time comes. This would not require a refinance, but it does assume that PPOR 2 would never become an investment.