Is this loan structure sound enough?

[Vampii]

Hi there,
This is our 2nd purchase and we are quite green still on buying property. I was hoping that someone could confirm that my potential loan structure is sound as we are going to make an offer on a property and obtain finance soon. This is for a PPOR which we do not intend to convert to an IP as it is semi rural and I personally don’t think it will have a very good rental yield.
Property price $535K
Deposit $200K
Loan amount $335K split into 2 parts
$100K Fixed P&I – to give some certainty of repayments and also so that we can drop money from the offset in here if we want to get a LOC to purchase an IP. We would also feel like we would be paying the property off as vs having the full amount in an interest only arrangement
$235K Variable Interest only with 100% offset – We would like to park money in here so as to lower our repayments.

We would appreciate any thoughts or feedback. Thanks in advance

 

[Bigtone]

Set up the investment split now in case rules change, or you situation changes.

Loan amount total $428,000

Split One I/O Fixed $100,000 (if you want some fixed)

Split Two I/o Var $235,000 offset account attached put all savings in here

Split Three I/O Var $93,000 Pay down to zero at settlement so when you spend it all the interest is tax deductible and only use for investment, I wouldn't go LOC I would just have variable for cheaper rate.


Good luck

 

[Vampii]

Thank you Bigtone for your reply.
I noticed you put I/O for split one, is it not ideal to pay off some principal for a PPOR not being converted to an IP?
By split 3 do you mean a loan with redraw facility? Sounds like a good idea

 

[Bigtone]

Hi Vampil,

I like interest only as you control the minimum repayment not the bank.

By saving money in the offset account on split 2 you are reducing the interest charge and in effect reducing the loan balance but just in a more flexible way.

Yes loan with a redraw, 10 years interest only would be my set-up for split 3.

Cheers

 

[Vampii]

Thank you Bigtone, I really appreciate your help