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From: Anonymous


My mate needs some advice.

He has a $100,000 home loan on a house valued at $320,000 and has just purchased a $200,000 investment property. He wants to borrow 100% of the purchase price plus costs and the bank wants to use his home as collateral.

I've suggested that he withdraw some money from his home loan and use that as deposit, say 20% to avoid mortgage insurance = $40,000 approx. He should then be able to buy the new house without using his home as collateral. If he keeps good records he should be able to claim the interest on the extra money redrawn from his home loan on an interest only basis.

What we want to ask is:
Is this correct and the most efficient way of doing things?

Thank you for your help

Ali

 

[WebBoard]

Reply: 1
From: Victor Mann


Getting access to the equity in his current property he will need to have a LOC.
If he does not have one he will need to refinance or switch the loan type that he has with his current lender or new lender if he so desires.

The balance (80%) he can loan from any other institution however he will have to meet servicabilty criteria. He can include rental income as well in his income upto in some case 80% of rental received.

If this is not possible there are lenders that will lend on a non financial data required basis. But that is usually limited to 76% LVR. These loans are at about 1% higher than the variable rate, but you can have them interest only for upto 5 years if you need.

As far as tax deductions on the interest portion of the deposit Rolf would be better answering that one
If you need any further info re loans email me

Victor the broker!!!!!

Good hunting

 

[Rolf Latham]

Reply: 2
From: Rolf Latham


Hiya Ali

I feel the same as Victor generally. LOc or split loan facility. Keep the deposit part separate and at interest only. That way the tax man will leave you alone.

ta

Rolf