Hi guys
I have had this explained to me many times by different brokers but I still think I'm missing something... maybe I'm just dumb .. so can you guys tell me if I'm right..
Say I have PPOR worth 500K, and my loan balance is 250K. I'm told I could have 150K worth of LOC "to play with".. Now I assume that figure comes from:
80% of 500K = 400K, minus 250K = 150K... is this right?
Now if I did take out LOC of 150K to fund an IP, what happens to my original loan of 250K balance? Will the interest be calculated on 250K or 400K?
Now say I am buying an IP worth 400K including costs, I would draw 20% of the LOC as deposit = 80K, and take out another loan of 320K.. is this right?
So in the end I will have 3 loan "accounts":
250K secured against PPOR (P+I)
320K secured against IP (interest only)
150K LOC - of which I have only drawn 80K - so I will pay the interest on 80K only..
... is this right?
Now after all this I was told that most people would then prefer to have all their incomes inc. rent incomes put directly into the LOC - but I don't see why? Wouldnt you rather pay off the PPOR loan instead?
And finally, I then was told that with the rest of the LOC I could buy more IPs .. but doesn't this mean x-coll?
Thanks guys
I have had this explained to me many times by different brokers but I still think I'm missing something... maybe I'm just dumb .. so can you guys tell me if I'm right..
Say I have PPOR worth 500K, and my loan balance is 250K. I'm told I could have 150K worth of LOC "to play with".. Now I assume that figure comes from:
80% of 500K = 400K, minus 250K = 150K... is this right?
Now if I did take out LOC of 150K to fund an IP, what happens to my original loan of 250K balance? Will the interest be calculated on 250K or 400K?
Now say I am buying an IP worth 400K including costs, I would draw 20% of the LOC as deposit = 80K, and take out another loan of 320K.. is this right?
So in the end I will have 3 loan "accounts":
250K secured against PPOR (P+I)
320K secured against IP (interest only)
150K LOC - of which I have only drawn 80K - so I will pay the interest on 80K only..
... is this right?
Now after all this I was told that most people would then prefer to have all their incomes inc. rent incomes put directly into the LOC - but I don't see why? Wouldnt you rather pay off the PPOR loan instead?
And finally, I then was told that with the rest of the LOC I could buy more IPs .. but doesn't this mean x-coll?
Thanks guys