LMI deductibility

[Roosterman]

I have an IP with 2 loans against it, $300k used to purchase the IP and $120k which was used for the purchase of a PPOR.

I'm looking to do a third split to purchase another IP and may go to 90% LVR, which will obviously incur LMI costs (looking to cash out about $50k)

I understand the LMI is deductible over 5 years.

I'll then have a 90% lend on IP1 with 3 loans.

Does that affect the deductibility of the LMI - do I need to apportion it because $120k of the $470k total loan was used for a PPOR?

Or is there no issue here because it is the extra $50k loan which incurs the LMI and this is being used for an IP?

thanks
Roosterman

 

[D.T.]

Was the LMI you were charged based on 300k +120k or were their seperate LMI charges?

Otherwise just deduct 300k / 420k = 71.4% of your LMI fee over 5 yrs.

 

[Roosterman]

Thanks Dave

It hasn't happened yet, but I will ask my broker to ask the bank about how the LMI would be charged

 

[Paul@PFI]

Apportionment needs to be considered.

LMI is based on the extent of debt v's property values used as security. However the apportioning would be based on the use of the loan proceeds following that assessment not the various land used as security.

Depends what you use the new loan proceeds for. If its not drawn and used it would be non-deductible until used and then when used a % based on use etc.

 

[Terry_w]

See this recent thread
http://somersoft.com/forums/showthread.php?t=107539