How many people use their PPOR as security on IP's?

[normailson]

G'day All,
Correct me if I'm wrong but borrowing against your PPOR and using your PPOR as security are actually two separate / different things, even if the end result is the same.

One might offer the PPOR as security when the LVR doesn't make sense to the bank. Alternatively, one might set up a LOC against the PPOR to fund entry into an IP which is what people are discussing here.

I'm not entirely sure of this, so someone please correct me if I'm wrong - but let's accume you default or worse get an IP forclosed and sold by the bank etc. If there is still money owing, the bank will come after any other assets you have whether they're X-col'd or not. If it's in your name it's fair game.
"

This is the classic spruikers line: "Norm, use our financial services! That way if you run into problems with payment, they can't get at your house"

This is a blatant lie to get you to finance through them. I've heard lots of them say it - TIC, CWB......

Yeah right, every day is pay day at the bank! Fortunately, if the risk pays off you put yourself in such a position that you don't have that worry anymore.

 

[The_Bludger]

This is a blatant lie to get you to finance through them. I've heard lots of them say it - TIC, CWB......

Is this what they also refer to as the "All moneys clause"?

 

[Lukey13]

And arguably cheaper than a trust!

However the emotional notion of having a close to paid off PPOR or having the PPOR title in your hands is a strong motivator of behaviours.

That's a great point regarding asset protection without the costs associated with a trust.

In regards to paying off PPOR debt, I think it's important to differentiate between deductible and non-deductible debt against the PPOR. I would much rather be able to pay down non-deductible debt against my PPOR quickly and then borrow against that equity for deductible debt (ie. deposits for IPs).

I'd rather have an 80% LVR against my PPOR made up mostly of deductible debt rather than 20% LVR made up entirely of non-deductible debt. To me the 80% equity in the latter example would be "wasted" if it wasn't used for some kind of investment purpose.

 

[quoll]

I'm in the majority for this one, using the PPOR either as security or getting a LOC against it and using that as deposit seems to be what the majority do including us.

It helps you quickly move forward.

Cheers
quoll

 

[grossreal]

hi all
this is a different and alot more secure way of investing and its not to be seen as anything more then information.
1 A and B start investing A is the husband and B is the wife
the ppor is in B name
and then A takes the loan on a ip and uses the ppor as a equity loan to get over the deposit and has a second mortgage to B and the costs
the ip is bought in abc pty ltd with A as the sole director and A and B as 50% unit holders
the property gets to a value that does not need the equity lend and it gets paid out any the second mortgages get cancelled.
and A takes another loan.
and this keeps going with A taking all the risk and B taking 50% of any increase
now lets look at a liquidator
he looks for assets to grab.
he can't grab the ppor as it has been used to invest but its relatively arms lenght as it is a second mortgage and thats been paid out.
he can look at the Ip but if its at 80% he can only get 50% at most of anything over the 80% and then because its a company and the other director can carry on the business he would only get the valuation divided by 2 and the loan divided by two
the difference less 50% of any cost at the time.
now yes he could liquidate B but thats fine as now A starts to invest using the built up equity in the house and the ip's and after 7 years sells the ppor to her husband as she is all heart and he has little chance of getting a loan as he was liquidated and its been 7 years and now he has the no debt ppor and A is the front of the line and they keep building.
I use the ppor for investing didn't vote as it not mine and I'm B.

the best form of defence against any form of litigation, liquidation administration or any court action is debt.
If I am chasing 100k and you have nothing but debt where am I going to
A get my 100k
and b get the cost to get my 100k.
as the old saying goes its like getting blood out of a stone.
most of my structure and just did one for a client today.
is not assett protection its a maze or a structure that is very similar to hurdle race.
so at the start the litigant is all reved up and ready to run but by the third or fourth hurdle its a case of will I get anything and at the sixth its a case of it now has cost us close to the debt now do we think.
a has he any money
and b will we get any money.
and each wall cost money to get over. and if you can show that after climbing all those walls
all the get is 50% of a possible 20% less cost of a sale price that no one knows
take a ticket its that simple.
oh and tell a legal eagle that and they will not want to admit it but if they know you they will say thats very true.

 

[Pushka]

The idea of my "deed is in the safe" is a bit of an emotional fallacy as already pointed out.

My In laws tried to use the same argument as a reason not to buy an IP.

And yes, another who has a mortgage on their home but only for their IP purchase.

 

[Sultan of Swing]

G'day All,
Correct me if I'm wrong but borrowing against your PPOR and using your PPOR as security are actually two separate / different things, even if the end result is the same.

One might offer the PPOR as security when the LVR doesn't make sense to the bank. Alternatively, one might set up a LOC against the PPOR to fund entry into an IP which is what people are discussing here.

Agree.

I voted no.

I do have an LOC and other loans on my PPOR that I use for deposits on IPs but my PPOR is NOT security for the IPs. The IPs have 'stand alone' loans, some with different banks.

 

[GoAnna!]

Agree.

I voted no.

I do have an LOC and other loans on my PPOR that I use for deposits on IPs but my PPOR is NOT security for the IPs. The IPs have 'stand alone' loans, some with different banks.

Surely that is just semantics? If you have borrowed against your PPOR then you would have needed to provide the bank with the PPOR title as security for the loan. If the money is borrowed for the purpose of investing in ips be it the full purchase price, the deposit, the startup costs, renovation or development then you have provided your PPOR as security for your ips.

A stand alone loan against your ip suggests that 100% of all borrowings associated with that ip are secured against the ip itself.

Perhaps you are referring as to whether you have cross collateralised your PPOR with the ips rather than whether you have offered PPOR as security for ip loans?

Do you claim interest on these loans secured against your PPOR with the reason being that they are ip investment debt?

 

[Sultan of Swing]

Surely that is just semantics? If you have borrowed against your PPOR then you would have needed to provide the bank with the PPOR title as security for the loan. If the money is borrowed for the purpose of investing in ips be it the full purchase price, the deposit, the startup costs, renovation or development then you have provided your PPOR as security for your ips.

A stand alone loan against your ip suggests that 100% of all borrowings associated with that ip are secured against the ip itself.

Perhaps you are referring as to whether you have cross collateralised your PPOR with the ips rather than whether you have offered PPOR as security for ip loans?

Do you claim interest on these loans secured against your PPOR with the reason being that they are ip investment debt?

Hmmmm

Maybe its just the terminology.

The way I see it is, if you have your PPOR up as security for your IPs it means you have them cross collateralised.

I certainly have loans that I claim interest on on my PPOR but the bank doesn't see my PPOR as security for the IPs.