Loan structure feedback please.

[jacked]

Hi guys have a scenario I have been running in my head for a little while and would love some feedback... not exact figures but easy numbers.

-INVESTMENT PROPERTY 1
300k loan interest only with 300k sitting in offset account

-INVESTMENT PROPERTY 2
300k loan interest only with 300k sitting in offset account

-Want to purchase PPOR for the amount of 600k how would I best do this?
*I am under the impression of setting up a new loan interest only with offset account like above Ips.

1)refinance Ip for 20% deposit for ppor using the banks money instead of mine. (under the impression this would not work because this could be cross contamination of personal and investment?)
2)take money out of investment offset account for 20% for ppor, once loan is funded take all money out off investment offset accounts and put it ppor offset account, making investment property negatively geared and tax deductable again?

What would you do in this situation... and feedback would be greatly appreciated thanks in advance.

 

[Brady]

Is the PPOR you're purchase going to be an investment in the future? Is there a possibility of it being an investment in the future?

If there is no possiblity of the purchase PPOR being a IP at a later stage I would borrow $480k (80%) and use $150,000 from the offset funds and put the remaining $450,000 into the offset against the PPOR.

If you believe there is a possibility of the PPOR being an IP at a later stage and you want to maximum your cash funds I would set up seperate loan against one of the IP for $150,000 (even if its $75k against each or however possible) and the borrow $480k (80%) against the purchase property. Then all offset funds against the two of these loans.

All loans IO w/ offset. You would ensure that they are seperate loans so no cross purpose of the loan funds.


Should be simple for any banker or broker to set up. Just make sure they have a clue of what they are doing so they dont end up x-coll. (also on a side not are your current properties x-coll? If they are would be a good time to fix them up and uncross them)

 

[Peter_Tersteeg]

Scenario 1: This will be your home and will never become and IP.
* Take the cash out of your offset accounts, pay cash for the new home and only borrow additional funds if you need it.

Scenario 2: The new home could become an IP in the future.
* Borrow 80% of the property value. Use some cash from your offset accounts to cover the 20% deposit and purchase costs, or you could set up a separate loan account to access equity to do it.
* Make the loans against the new home interest only with an offset account.
* Move all your cash to the new offset account so you don't pay any (non deductable) interest.

 

[Terry_w]

Hi guys have a scenario I have been running in my head for a little while and would love some feedback... not exact figures but easy numbers.

-INVESTMENT PROPERTY 1
300k loan interest only with 300k sitting in offset account

-INVESTMENT PROPERTY 2
300k loan interest only with 300k sitting in offset account

-Want to purchase PPOR for the amount of 600k how would I best do this?
*I am under the impression of setting up a new loan interest only with offset account like above Ips.

1)refinance Ip for 20% deposit for ppor using the banks money instead of mine. (under the impression this would not work because this could be cross contamination of personal and investment?)
2)take money out of investment offset account for 20% for ppor, once loan is funded take all money out off investment offset accounts and put it ppor offset account, making investment property negatively geared and tax deductable again?

What would you do in this situation... and feedback would be greatly appreciated thanks in advance.

Many ways to do this. Seek your own legal advice before proceeding.

1. Take $600k from offset accounts and pay cash for the new PPOR
2. Take $600k from offset accounts and borrow 80% for the new PPOR - park $600k in offset account on the new home loan
3. take $600k from offset and borrow 105% for the new home and park money in offset
- this can be done 3 ways:
a) cross collateralise
b) set up LOC on one or both of investment property
c) borrow 25% from related party such as spouse or family discretionary trust
4. Take $600k from offset accounts and gift it to a discretionary trust. Take a loan from the discretionary trust and pay cash for the property. Allow the DT trustee to take a mortgage over the property
5. as in 4 but borrow 20% from the trust and 80% from the bank.

Borrowing 105% will ensure (if done correctly) that you can maximise tax position if the new PPOR were to ever become an investment.

 

[jacked]

Thanks for the positive feedback as always gents!

Current investments are not x-coll,The ppor will 99% never be used as a ip, just trying to figure out how to maximise keeping my cash available if need be...

I understand using offset cash for 20% and transferring funds to ppor to claim interest on investment loans no problems... but I am not to confident I understand what you both mean by 'set up a separate loan account to access equity to do it' ???

Thanks.

 

[Peter_Tersteeg]

Thanks for the positive feedback as always gents!

Current investments are not x-coll,The ppor will 99% never be used as a ip, just trying to figure out how to maximise keeping my cash available if need be...

I understand using offset cash for 20% and transferring funds to ppor to claim interest on investment loans no problems... but I am not to confident I understand what you both mean by 'set up a separate loan account to access equity to do it' ???

Thanks.

You don't need to use your offset cash to get your 20% deposit, instead you can get an equity loan for deposit and costs. This would maintain your cash position and give you a few extra tax deductions if the PPOR did become an IP.

Given it is unlikely to every be an IP, I'd go for the simple solution. Figure out how much of your cash you are willing to part with as a deposit (essentially how much cash do you want to keep). Get a loan for the balance and move any remaining cash into an offset account against this new loan.

 

[jacked]

Thanks PT bear! and all the above feedback given from all of you.

I Think the simple solution is what I will do (I am not up to this stage in my life atm but I am around 2-3 years away) Given that the ppor I intend to buy would be too nice to ever rent out and after possible renovations ect would never want to have to pay CGT, it becoming a ip in the future is a long shot.

Its great to get professional feedback and different ideas... I started reading this forums 4 years ago with nothing but a job and how I am here... so once again thank you.