Why not just pay the rates etc from the offset on loan 1? No need for 2 offsets unless houses are in different names maybe.
Paying off PPOR good or bad?
- Thread starter KyanFable
- Start date
Why not just pay the rates etc from the offset on loan 1? No need for 2 offsets unless houses are in different names maybe.
Both houses will be in my name
I was just trying to separate the income/ expenditure but if its not necessary I could use the 1 offset.
So I can use my PPOR loan offset account for wages, rental income and dividends etc?
What about if I had multiple properties? Would I divert all rental income into the 1 offset?
I was just trying to separate the income/ expenditure but if its not necessary I could use the 1 offset.
So I can use my PPOR loan offset account for wages, rental income and dividends etc?
What about if I had multiple properties? Would I divert all rental income into the 1 offset?
You would have to save as much as possible in the offset account attached to your main residence. This will save you non-deductible interest.
You can have all rents going into the offset and then pay the investment loans from this account.
Ok that makes sense Terry ... Thank you
I feel a bit stupid now because I realize I may have done something silly
When I recently slit my loan I did this
Loan 1 120k with 0 in offset account
Loan 2 90k with 90k in offset account waiting to be used as a deposit when I find my IP
I guess I should be moving the 90k into loan 1 offset account straight away... Until I find my IP!?!
I feel a bit stupid now because I realize I may have done something silly
When I recently slit my loan I did this
Loan 1 120k with 0 in offset account
Loan 2 90k with 90k in offset account waiting to be used as a deposit when I find my IP
I guess I should be moving the 90k into loan 1 offset account straight away... Until I find my IP!?!
Just before you buy the next IP just pay the 90k into the loan 2. Then redraw it out for the deposit.
To ensure that the funds are 100% tax deductible against the new property.
So did the $90k in the offset against IP2 come from Loan 2?
If so then you need to keep this account separate as it contains borrowed money. I would just use these funds to pay for investment related expenses, but not put any other funds into this account. I wouldn't move the $90k into the other offset account or the home loan.
This complicates things.
You have borrowed money to place into a savings account. You will then use savings to invest. No nexus between borrowing and investing.
But, too late now. The best you can do is to try to keep that borrowed money separate from non borrowed money. Do not deposit anything into that offset account. Just pay the interest each month and take out investment expenses (rates, insurance etc).
My lender said that when the loan funds the $ will be disbursed into my savings account. Can I transfer this into the loan and then redraw for purchasing income producing assets? What is the minimum balance on the loan before it auto-closes?
Or would it be better to setup an offset account?
Note: I already have an offset account for my PPOR
To clarify, my situation is I recently applied for a split loan against an existing IP to partially fund the deposit for a new IP purchase. I will use personal savings to fund the difference.
My lender said that when the loan funds it will be disbursed to my transaction account. But I won't be purchasing for at least another couple of months. Do I transfer the funds into the new split loan and then redraw later on, or should I setup an offset account against the new split loan and park the funds in there?
I'm wondering if there is a difference between the two approaches. I prefer the redraw approach so I don't have to open up a new offset account.
My lender said that when the loan funds it will be disbursed to my transaction account. But I won't be purchasing for at least another couple of months. Do I transfer the funds into the new split loan and then redraw later on, or should I setup an offset account against the new split loan and park the funds in there?
I'm wondering if there is a difference between the two approaches. I prefer the redraw approach so I don't have to open up a new offset account.
I think there needs to be a direct link between the borrowing of the funds and use as a deposit. Parking the funds for a couple of months breaks that link.
Having loan money sitting in redraw is fine, but the problem occurs when you need to draw this money from redraw and pay to agent for deposit, stamp duty etc.....bank will tell you that they can't write cheque from redraw.... technically this money needs to drawn and park somewhere for you to write cheque from it (like savings account...offset)....
I think this way it could be arranged..your views pls....
draw money from redraw and park it into the offset account 2 (not the existing offset linked to PPOR), open brand new offset account 2 and link it to IP1 Loan....write cheque from it get rid of as much money you can from this account (stamp duty, initial deposit, etc....) if there are still some money left then let it be in this account.... one strict rule all the money coming out this account should only and only be used for investment purposes....never add cent to this account....
once you settle on IP2...and money has been disbursed....park rest of the offset2 money into the redraw of IP 1, close the offset2.
hotrod, are you suggesting there is specific time like (couple of months) will consider breaking the link. If that is the case then how long this offset2 account can be open before parking money in redraw.
Replicate the process in future if you need the redraw money for investment purposes.....I agree that from the nexus point of view on paper this is not the right way....nonetheless it's cleanest way to do it...... (I think!!!)
I think this way it could be arranged..your views pls....
draw money from redraw and park it into the offset account 2 (not the existing offset linked to PPOR), open brand new offset account 2 and link it to IP1 Loan....write cheque from it get rid of as much money you can from this account (stamp duty, initial deposit, etc....) if there are still some money left then let it be in this account.... one strict rule all the money coming out this account should only and only be used for investment purposes....never add cent to this account....
once you settle on IP2...and money has been disbursed....park rest of the offset2 money into the redraw of IP 1, close the offset2.
hotrod, are you suggesting there is specific time like (couple of months) will consider breaking the link. If that is the case then how long this offset2 account can be open before parking money in redraw.
Replicate the process in future if you need the redraw money for investment purposes.....I agree that from the nexus point of view on paper this is not the right way....nonetheless it's cleanest way to do it...... (I think!!!)
Not sure why the money will no longer be borrowed money once it hits a savings account.
What about a situation when you turn your PPOR into an IP. Does the interest on the outstanding loan amount become deductible?
SYD
I think it's overly pedantic. Imagine trying to pull up someone for that in a Court of law. The judge would laugh at the ATO for being ridiculous. Sure, if you leave it in there for a long time then it loses that nexus between the borrowing and the expense - but not for 1 minute. There is definitely a reasonableness test that applies in these situations.
