PPoR to IP loan refinancing

[lup15]

Hi all, time to start my real estate path but with some future planning.

My partner and I are looking to purchase a small unit for $350k. We later want to purchase a bigger property and move into it and turn the unit into an IP.

When obtaining a loan for the initial PPoR, I am thinking of having an LVR of 80% with an offset a/c. This loan will be interest only and we will put all the funds available into offset a/c. When we are ready to move again, take all the funds in the first offset and put it towards the new PPoR offset a/c with a loan much like the first one.

We'll then refinance the loan on the initial PPoR to an investment loan, which would still have the 80% LVR as nothing was paid off.

Is this possible? If not, what would be my options? I have a feeling I'm missing some key things, so feel free to point them out.

Thanks all
Michael

 

[ZachAnSel]

Hi all, time to start my real estate path but with some future planning.

My partner and I are looking to purchase a small unit for $350k. We later want to purchase a bigger property and move into it and turn the unit into an IP.

When obtaining a loan for the initial PPoR, I am thinking of having an LVR of 80% with an offset a/c. This loan will be interest only and we will put all the funds available into offset a/c. When we are ready to move again, take all the funds in the first offset and put it towards the new PPoR offset a/c with a loan much like the first one.

We'll then refinance the loan on the initial PPoR to an investment loan, which would still have the 80% LVR as nothing was paid off.

Is this possible? If not, what would be my options? I have a feeling I'm missing some key things, so feel free to point them out.

Thanks all
Michael

If you plan to move one day, better take LMI if your serviceability/salary strong. This will keep your deduct-ability loan high when unit became IP

Touch base with one of savvy broker to crunch numbers, and let see what options available and go from there.

Setting I/O with offset is showing you're on the right track

 

[Terry_w]

Try to borrow 105% so that when you move out you can maximise deductions. This could be done with careful planning and related party loans.

 

[MatC]

Hi Lup 15

My views my be a little left field, but if you feel you can run at 80% and have the capacity to save the next deposit with small capital growth then this is a great strategy as you avoid the lmi cost. However if you may need the MI you are better to put this onto the investment debt if possible. Whats you current ability to save and who knows what the future may bring.

 

[Rolf Latham]

Hiya

Sounds like an ok strategy given the limited data

some things to consider

1. Name on title............ if this will become an IP long term, what are the tax implications if its neg geared long term or posirive geared, joint name, single name, unitir discretionary trust

2. Use the right lender for the right reasons, at the right time. Create a long term plan, sit with your banker/broker to model that long term plan, and within reason,stick to that plan. Dont be swayed by fancy intro promotions, cashbacks blah blah. Focus on the end game

3. Understand what you are being taught and why you are being taught it, and the motivations of the teacher.

ta
rolf

 

[lup15]

Thanks all, great replies and I will definitely investigate all avenues to make the right informed decision.

I am definately planning long term. My philosophy for investment is to take small steps in the right direction to get the ball rolling and gain experience. All about snowballing and continuing to make small positive steps, rather than giant leaps backwards

What sort of further info would be required to make a clearer picture?

Currently we have no debt, combined income of approx $100k and are DINKs. We are currently renting and want to use the next 1 year to find a nice unit in which we can begin our family, which will mean we will be living there for 2-3yrs minimum. We may have the benefit of our parents for some initial capital.

We are looking at old units so we can renovate during our time living there. Although we won't be able to claim tax deductions for the initial improvements, I am hoping when it becomes an IP it will increase the value of the property, better rent potential and claim depreciation. I want to use this time to learn about improvements first hand and start building networks with regards to builders etc.

I would also greatly appreciated any recommendations for brokers, solicitors and accountants in Brisbane area. Am happy to travel for the services of reputable and knowledgeable expertise.

Sorry for the long post, I am grateful for this community with providing assistance for the next big step of our lives

 

[Aaron_C]

Sounds fine just make sure that next lender allows release of equity etc.