Line of Credit extension for IP?

[MPmelb]

Hi All,

I currently have a Line of Credit for my PPOR and am thinking of conveniently extending it to buy an IP. I would like to pay off the PPOR first from the LOC because it is not tax deductible.

How would this be possible when the LOC will then include the PPoR and the IP together as one?

Thanks in advance.

 

[Simon]

Have the LOC split or even two LOCs. These can then be distinguished for each property.

Ideally draw a 20% deposit against the PPOR and use it to get a seperate mortgage for the IP.

 

[davy]

Just to add to Somon's comments.

You can only draw down from your LOC if you have equity in your PPOR. You might need to hace your PPOR vauated by valuer.

 

[Gill Bates]

Re: I would like to pay off the PPOR first from the LOC because it is not tax deductible.
The interest on the LOC for ur PPOR will still be non tax deductable , so unless the interest rate in the LOC is lower or their is some other reason why would u do this ?

 

[chrislaw]

LOC split

Hi all,

I also have a LOC for 168k on my PPOR val 320k. I would like to get an IP and the ANZ bank said I could push the LOC to 225k but this would mix LOC with IP.
So whats the best way to do this? Simon said maybe 2 LOCs, is this best/easiest way or are there other ways? Do I just ask the bank for a second LOC secured against my PPOR, is it that simple?
If I get say 40k on a second LOC for my deposit and some renos, what happens if I don't use it all, how do I get the remainder back on my PPOR LOC to reduce it?

All ideas very welcome,
Chris

 

[Gill Bates]

the min LOC with the national bank is 20K.
so find out from ur bank what the min loc is.
ask ur bank how/what proceedure is for altering the split levels

i would not secure a LOC against something if u where going to sell the security soon.

 

[Simon]

You don't necessarily need a LOC to do this. A basic loan drawn against the PPOR for the deposit would suffice and often be cheaper (but not in every case). Many investors prefer the flexibility that an open LOC with a chequebook attached can offer.

Gill is right. Any loan to pay out a PPOR is not deductable regardless of the security offered.

Cheers,

 

[chrislaw]

Thanks Gill and Simon for the advice, I will talk to ANZ and see what they can offer.

Chris

 

[MPmelb]

Why do I want to split the LOC?

Hi All,

Thanks for the feedback.

Just to clarify, I want to pay off the LOC on PPOR as a priority because it is not tax deductible. I still owe $95K on this.

In the mean time, I would like to buy an IP this year by extending the LOC (as a convenience), but I would like to direct repayments into the LOC on what I owe on the PPOR firstly rather than the IP (due to tax consideration).

Can this be done, and if yes, how?

I thought extending the LOC would be most convenient, do you think this is the case? Is there an easier and better way?

Thanks to all in advance.

 

[phm]

Hi there

We have a LOC and bought our car on it (I know, slap on the hands) Then we used the balance to pay for the IP deposit, SD and other incidentals. Our accountant said that he could apportion the taxable and non taxable as long as we keep records.

 

[chrislaw]

Hi MP,

You said
"How would this be possible when the LOC will then include the PPoR and the IP together as one?"

I don't think you should increase your PPOR LOC to include an IP. I have asked alot of ppl regarding increasing my LOC just for the deposit of an IP, then getting a separate IP loan and met a resounding "Keep the IP and PPOR separate".
The reason is it would be create more work for your accountant now and for as long as you keep the IP (maybe forever) and to clearly show a difference btwn the deductable and non-deductable loan for the ATO.
When I asked the ANZ if i could have a 2nd LOC instead they said it was no problem at all. Then my loans costs and ongoing fees would be clearly shown as an investment not personal. In your case your 2nd LOC could buy your IP in one hit and your above question would be answered as they are 2 separate loans.
Also, a 2nd LOC for IP loan may not be your best option as it will be a slightly higher interest rate, do you really want to pay more for convenience? why not shop around first.
Another thing, even if you have the 2 separate loans, moving all the rent money from the IP to your PPOR to pay the non-deductable loan (which is what I assume your saying) is still being tested by the ATO in court, so you might want to read past posts on this before doing it.
Lastly, why not email some ppl on this forum such as mortgage brokers - Rolf and Simon on what loans they can do for you, it could be well worth the email before you start.

Chris