Investment Loan from equity in PPOR

[Notaxez]

Hi there

We are seeking to purchase our 2nd IP and to do this without paying LMI and to have the new IP stand on its own, our banker suggests we use the available equity in our PPOR (only up to 80%) which equates to $55k and convert this amount into an investment loan of which this would then be used as a deposit for our IP. Hence, avoiding LMI.

My two questions are 1) is this investment loan a tax deduction? and 2) does this sound like a good strategy?

I would appreciate any thoughts as we are getting confused by all the possible ways in which to set up loans once you start investing.....

thanks

 

[Simon]

It is a viable idea.

Have the PPOR increase done on a separate loan or at least in a split loan on the statement. Make sure it is clearly distinct from the original loan.

Have it IO so you can pay down the PPOR principal and let the IP loan run.

 

[Rolf Latham]

makes sense........unusual for a lender to come forward with this approach

The loan is deductible if you follow the loan "purpose" rule even though it may be secured to a PPOR

ta
rolf