"No Valuation will be required." Does this mean...?

[fullylucky]

Have you run your "tax" side of this past your accountant ?
I don't have an accountant. I do my own taxes using etax.
Can I deduct the $100k or not? if so I just put it in the correct section. is the way i ago about this going to prevent me from deducting it?

I have run the tax side with CBA mobile banker, they said they are aware of this and will make as much of the investment loan tax deductable. they said the $100k should be and they will structure it that way.


I think you are going to get a smack on the wrist for messing up the simple deductability of the 100 k redraw.

Can I guess not, because etax doesnt provide such advice ?

While the 100 k is a new borrowing and is deductible, Id guess your HOME loan is PI, thus any repayment you make will need tobe apportioned.

If you are going to "the dark side"and using xcoll, at least structure it so you borrow 105 % of the IP price as a single loan and simply reduce your home loan limit by 100 k.

Please note, unlike your Mobile Banker, Im not providing tax advice, merely suggesting you seek same.

A further tangent

Have you taken house insurance, since you have an insurable interest, and if the place burns down and the vendor doesnt have cover your investing career may be stopped for a loooooooooooooong time.
Yes I have. I got it with CBA, $56 a month started yesterday.

And more

As an interstate buyer, have you done your own independent valuation as often recommended, not so much to eliminate that you are paying to much, but to minimise risks which may be not apparent to you.
I haven't. I know the suburb well. I have access to RPdata and I have looked up recent similar sales.

And

Have you done the various searches to make sure there isnt a new motorway or McDonalds planned for your new neighbour.
I haven't but there won't be. because there is already a mcdonalds near by. I did a Noise corridor search or something and it's fine.

And

Have you done a sales history check to maybe ascertain why the property has sold 6 times in 10 years "
I have access to rpdata the properties didn't sell every year. owners have kept it for a very long time. for all houses on the street.
And

You state, you aren"t using a broker. Was that simply a statement of fact, or were you making your preference known ?
?yes, i was just stating I wasn't because someone asked if i was using a broker. I don't have anything against brokers. i think people who use brokers are fine??

And finally for this round

How did the P&B come back ?
I haven't done P&B yet.

 

[The Y-man]

OK I think Cross Col is:

...

if it's cross collateralized changing security (selling a house) makes the bank do recalculations which they don't like to do and want to charge a fee for doing it.

Fullylucky,

When you sell a house, the bank can keep all the proceeds (depending on their recalculations) and you may not see all, or ANY cash until you sell all your houses that are crossed (we have had some people on this forum happen to
them - me included).

The Y-man

 

[fullylucky]

Fullylucky,

When you sell a house, the bank can keep all the proceeds (depending on their recalculations) and you may not see all, or ANY cash until you sell all your houses that are crossed (we have had some people on this forum happen to
them - me included).

The Y-man

What does this mean? That I can't get the proceeds?

When someone sells their house doesn't the money go into their account?

Do you mean, even though the money goes into their account they can't do anything with it it's "locked" in because another house is using that "money" as security?

If the money is "locked" can you still earn interest or can't do anything? Surely there is a way to recalculate the security.

The mobile banker told me now days with the new rules the fees are very low $350 - $380 not much and all banks charge this for doing recalculations when you sell.

 

[fullylucky]

This is what the Mobile banker said:

"CBA would be still be holding both property’s as security, if they were held separately or together. Banks don’t use the security type to determine a loan type. For example you can have an Investment Loan secured against an Owner Occupied residence. It’s the purpose that a loan will be used for that determines the loan type.

Cross securing simply means that the bank holds both security’s together with a total value of $1,377,778.00. Then the way your application is currently structured is that you will have two separate loans one for 320K Owner Occupied & one for 680K Investment. This makes everything very easy for your accountant. It also avoids Mortgage Insurance as total LVR is under 80% . And both of these loans would get 1% off the variable rate.

Any funds you have left over at settlement can go straight into your MISA or advance repayments on your Owner Occupied Loan, generally not on your Investment Loan, that way you would not be reducing you’re tax advantage.

If you secured them separately you would probably end up with 3 loans, as you would have to have 20% of the new purchase price to avoid mortgage insurance on the new purchase. So you would probably have existing loan of 320K plus a small investment loan secured against your existing property plus a new investment loan secured against new property.

All our Standard Variable loans can have a MISA account activated after settlement as they are already pre approved (you just have to make a deposit into them).

I hope this answers your questions. Please let me know if it does not, or if you would like to discuss possible changes to what we have arranged so far.

Yes 2 loan splits is an easier process & easier to manage ongoing.

Its approx. 72.59% LVR this is because you will have a 320k split (which will include your redraw, part of which will be used to go towards settlement). And a 680K split.

On my calculations you will still have approx. 40K is surplus funds after settlement which you can pop straight into the 320K loan split or the attached MISA. By structuring this way I am able to give 1% off both loan splits."

 

[Rolf Latham]

Have you run your "tax" side of this past your accountant ?
I don't have an accountant. I do my own taxes using etax..[/B]

see

I guesed that too : )

Dont rely on a banker or broker to give u tax advice.

If your redraw loan is IO, the 100 k isnt deductible on its entity.

if you banker was really trying to be helpful, they would spit tha 100 k away from your home loan, as a separate split and make it io.

That way the 100 kis fully deductible AND wont be an accounting nightmare long term.

but dont take my advice, spend the $ and speak with an accountant - PLEASE !




Glad to see have most of the the other stuff covered

ta
rolf

 

[The Y-man]

What does this mean? That I can't get the proceeds?

When someone sells their house doesn't the money go into their account?

Do you mean, even though the money goes into their account they can't do anything with it it's "locked" in because another house is using that "money" as security?

If the money is "locked" can you still earn interest or can't do anything? Surely there is a way to recalculate the security.

The mobile banker told me now days with the new rules the fees are very low $350 - $380 not much and all banks charge this for doing recalculations when you sell.

Example:

You have 2 house

House A you buy for $600k
House B you buy for $400k
You have total cross loan for $800k (LVR 80%, no LMI)


Now sometimes later, you need some cash, so decide to sell House B

Let's say you can sell House B for $440k (good yes?). So you expect to be able to get $80k original 20% "deposit" + $40k profit: total $120k cash.



Now you bank does recalculation.

Unfortunately, the area House A is in is not doing too well, and the bank valuation only comes back at $500k

So to maintain 80% LVR, the loan needs to be at $400k

So now you only get $40k cash available to take out, not $120k....

The sale effectively forces a revaluation of ALL crossed properties.


Yes - very similar thing happened to me!

The Y-man

 

[MC1]

Nothing has been done yet... Now is my chance to change it how i like.

I understand tax has nothing to do with security.

can you have a go at explaining it in a nut shell?

What's the benifit of not crossed compared with crossed.

All these questions.... why dont you contact a broker who knows whats going on. They'd sort this out in 5 minutes. Or ask your banker to explain it to you

 

[sanj]

Some of you guys are incredibly patient, kudos.

 

[MC1]

Im not one of them Sanj

 

[Shahin_Afarin]

This is what the Mobile banker said:

"CBA would be still be holding both property’s as security, if they were held separately or together. Banks don’t use the security type to determine a loan type. For example you can have an Investment Loan secured against an Owner Occupied residence. It’s the purpose that a loan will be used for that determines the loan type.

Cross securing simply means that the bank holds both security’s together with a total value of $1,377,778.00. Then the way your application is currently structured is that you will have two separate loans one for 320K Owner Occupied & one for 680K Investment. This makes everything very easy for your accountant. It also avoids Mortgage Insurance as total LVR is under 80% . And both of these loans would get 1% off the variable rate.

Any funds you have left over at settlement can go straight into your MISA or advance repayments on your Owner Occupied Loan, generally not on your Investment Loan, that way you would not be reducing you’re tax advantage.

If you secured them separately you would probably end up with 3 loans, as you would have to have 20% of the new purchase price to avoid mortgage insurance on the new purchase. So you would probably have existing loan of 320K plus a small investment loan secured against your existing property plus a new investment loan secured against new property.

All our Standard Variable loans can have a MISA account activated after settlement as they are already pre approved (you just have to make a deposit into them).

I hope this answers your questions. Please let me know if it does not, or if you would like to discuss possible changes to what we have arranged so far.

Yes 2 loan splits is an easier process & easier to manage ongoing.

Its approx. 72.59% LVR this is because you will have a 320k split (which will include your redraw, part of which will be used to go towards settlement). And a 680K split.

On my calculations you will still have approx. 40K is surplus funds after settlement which you can pop straight into the 320K loan split or the attached MISA. By structuring this way I am able to give 1% off both loan splits."

Your banker is wrong - you need to set it up the way I explained. Ask him why he cannot do this?

Regards

Shahin

 

[Aaron_C]

Your banker is wrong - you need to set it up the way I explained. Ask him why he cannot do this?

Because he can't be bothered doing two applications. Anyway the OP has made up his/her mind on this so I wouldn't bother further.

 

[nhg]

Have you taken house insurance, since you have an insurable interest, and if the place burns down and the vendor doesnt have cover your investing career may be stopped for a loooooooooooooong time.
Yes I have. I got it with CBA, $56 a month started yesterday.

May I suggest you take a look at what you are covered for.

I have 3 insurances with CBA, home and tenant (so probably the reason) and they are WAY more expensive than that on houses worth a whole lot less than the numbers you are talking.

 

[Rolf Latham]

Any funds you have left over at settlement can go straight into your MISA or advance repayments on your Owner Occupied Loan, generally not on your Investment Loan, that way you would not be reducing you’re tax advantage."

enough said



ta
rolf

 

[joanmc]

I don't want to sound mean but you don't seem to be ready to buy an investment yet. Between this and your other thread I am terrified for you as you seem to be lacking in what I would consider basic investing knowlege.

I can't stress enough that you need to speak to a broker. The CBA mobile lender ( who I am sure is a lovely person) doesn't have a clue about structure. Cross-coll is the work of the devil I assure you. I know this from experience as we are completely up ***** creek because of it right now.

This is a very large first investment purchase, please take on board the excellent advice given to you by the brokers on this forum.

 

[alexlee]

Oh well, if someone is in his 20s and smart enough to do his own tax returns, doesn't need lawyers and 'knows' that he will never, ever buy another property in his life for the next 50+ years, who are we to question his confidence?

For other newer people who might not be as supremely confident: avoiding costs where you 'see' the price tag and as a resulting ignoring the 'potential' (higher dollar, but not obvious) risks is like evaluating a house solely on a visual inspection of the color of the walls, instead of paying an inspector to check out whether the foundations are sound or not. Property finance structuring and legal advice is like good foundations in a house: if done properly, you won't even know it's there because it helps you AVOID problems. If it's not there, you might not know until you're cocking your head sideways to enter your front door.

Cross col, for example, may not be an issue for years, until, say, a life event such as marriage, change of jobs, starting a family, starting a business, retirement, etc
(which some think will never happen to them, apparently) means you have to buy another house or sell existing properties.

Not having a proper review of contracts, titles, etc might not be an issue until, say, you want to sell the house in the future, and the buyer does do a proper title review and realise your pool sticks 10cm into the neighbour's property.

It's hard enough to find good loan structuring advice. Most brokers don't know because they might only deal with 'standard' buyers. Same with accountants. And none of their friends invest either. On THIS forum, because there are experienced investors, the quality of the information is much better than you'll find at the weekend bbq. It would be a good idea to take advantage of the information here.

As newbies, you don't have to 'contribute', as such. Experienced investors like to discuss scenarios. So if you just post your scenario for discussion, it's contributing. Contributing doesn't have to be 'I have this great idea I think other people should consider', because quite simply, with little experience your idea may be way off the mark.

 

[joanmc]

What does this mean? That I can't get the proceeds?

When someone sells their house doesn't the money go into their account?

Do you mean, even though the money goes into their account they can't do anything with it it's "locked" in because another house is using that "money" as security?

If the money is "locked" can you still earn interest or can't do anything? Surely there is a way to recalculate the security.

The mobile banker told me now days with the new rules the fees are very low $350 - $380 not much and all banks charge this for doing recalculations when you sell.

FYI when you sell the money goes to the bank first and they decide how much of it you can have. This actually happened to us. we had a few houses tied together and sold one with a significant profit after reno and growth. The bank automatically applied the excess funds after settlement to our other loan and to get it I had to actually apply for the funds. Our LVR was already well below 80% even without that money, they just decided to take it because they could.

 

[fullylucky]

I really appreciate everyone's advise but I would also like to remind everyone that there are things only I can see. like people here only see let's say 50% of the story so based on the facts i have provided, they would choose option A for example. However I see 100% of the picture and I think option B is the best option, and if other members saw 100% of the picture they might choose option B also...

I have got a conveyancer, i'm paying them $700-$800, they will run other searches etc.

Alot of people here are like you should seek a "professional" expert this expert that but the fact is they charge alot for things that are not worth it.

also studying economics, I remember one of the biggest mistakes people have with econ is they consider in proportions. Oh don't worry it's only 0.001% and that's a mistake you shouldn't look at proportions you should look at actual dollar values. If you would have drove to the next shopping centre to save $80. Then doing things yourself or driving some where yourself to save $100 is what you should do. If you don't mind these little costs, they leak here and there and make your loan repayments longer. it's important to save and pay off as much as possible at the start of your loan.

eg. with my current homeloan it was set for 30 years but since i managed to save and pay off more of it at the start i would have paid it off in 6-7 years.

the properties i have/am purchased/ing, the property doesn't matter so much even if it was just the land it would cost that much. all these tests by professionals is just a waste of money.

There are other benifits of cross col that i don't want to post here but i understand the negatives/cons of cross col (now that you have explained it) and i don't see them as being an issue. eg. let's say (i can't) but hypothetically I can pay off the loan in a year. can you see how this wouldn't be a big issue.

Thanks for everyone who explained Cross Col. And providing real examples, really appricaite it.

 

[wylie]

I have got a conveyancer, i'm paying them $700-$800, they will run other searches etc.

Alot of people here are like you should seek a "professional" expert this expert that but the fact is they charge alot for things that are not worth it.

We use a solicitor and only pay the same as you are paying a conveyancer. If things go wrong, a conveyancer may not be able to get you out of a pickle.

And the other common... brokers on here don't actually cost you anything, and they are most certainly worth it.

 

[Jake D]

I really appreciate everyone's advise....

Using a broker probably won't cost you a dollar.
Setting up your loans properly in the first place probably won't cost you a dollar.
Using re-drawn, non-deductible cash as a deposit will cost you lots of dollars.

 

[MC1]

I really appreciate everyone's advise but I would also like to remind everyone that there are things only I can see. like people here only see let's say 50% of the story so based on the facts i have provided, they would choose option A for example. However I see 100% of the picture and I think option B is the best option, and if other members saw 100% of the picture they might choose option B also...

I have got a conveyancer, i'm paying them $700-$800, they will run other searches etc.

Alot of people here are like you should seek a "professional" expert this expert that but the fact is they charge alot for things that are not worth it.

also studying economics, I remember one of the biggest mistakes people have with econ is they consider in proportions. Oh don't worry it's only 0.001% and that's a mistake you shouldn't look at proportions you should look at actual dollar values. If you would have drove to the next shopping centre to save $80. Then doing things yourself or driving some where yourself to save $100 is what you should do. If you don't mind these little costs, they leak here and there and make your loan repayments longer. it's important to save and pay off as much as possible at the start of your loan.

eg. with my current homeloan it was set for 30 years but since i managed to save and pay off more of it at the start i would have paid it off in 6-7 years.

the properties i have/am purchased/ing, the property doesn't matter so much even if it was just the land it would cost that much. all these tests by professionals is just a waste of money.

There are other benifits of cross col that i don't want to post here but i understand the negatives/cons of cross col (now that you have explained it) and i don't see them as being an issue. eg. let's say (i can't) but hypothetically I can pay off the loan in a year. can you see how this wouldn't be a big issue.

Thanks for everyone who explained Cross Col. And providing real examples, really appricaite it.

You seriously havent got a clue. Good luck with going everything on your own. But remember a large majority of successful people have the right network around them ...... accountants, solicitors, brokers etc etc.

I think you are more suited to the branch network though.