PPOR (Future IP) refinance question

[cannonloose]

Hi,

Looking for some initial thoughts on my situation. I'm in the process of refinancing my PPOR (balance $400k, valuation $600k). In a few years I'm looking to purchase a new PPOR, and turn my existing PPOR into an investment property. Will be refinancing to an IO loan and parking excess funds in an offset account.

Lender has suggested to refinance to 80% ($480k) and add the additional equity to my offset account. Just wondering if that's a sound thing to do?

The additional equity would assist with the speed of being able to purchase the PPOR, however I've read some threads warning about deductibility of interest in certain circumstances and wondering if that's something I'm potentially going to run into?

Cheers

Pete

 

[Aaron_C]

It's OK as long as you transfer the 80k back into the loan account after.

 

[Rolf Latham]

In a few years I'm looking to purchase a new PPOR, and turn my existing PPOR into an investment property. Will be refinancing to an IO loan and parking excess funds in an offset account.

So that screams refinance to IO with 100 % offset NOW ?

ta
rolf

 

[cannonloose]

It's OK as long as you transfer the 80k back into the loan account after.

So there's no real point is there?

So that screams refinance to IO with 100 % offset NOW ?

Yes loan was originally P&I but changed to IO/offset a while ago.

Thanks for the input. Silly question but just needed to get my head around it. Wasn't 100% sure.

 

[Terry_w]

Hi,

Looking for some initial thoughts on my situation. I'm in the process of refinancing my PPOR (balance $400k, valuation $600k). In a few years I'm looking to purchase a new PPOR, and turn my existing PPOR into an investment property. Will be refinancing to an IO loan and parking excess funds in an offset account.

Lender has suggested to refinance to 80% ($480k) and add the additional equity to my offset account. Just wondering if that's a sound thing to do?

The additional equity would assist with the speed of being able to purchase the PPOR, however I've read some threads warning about deductibility of interest in certain circumstances and wondering if that's something I'm potentially going to run into?

Cheers

Pete

I would suggest you don't do that unless you set up a separate split. The interest on the extra borrowings will not be deductible if these are used for the new main residence.