restructuring

[Emo21]

morning. We are about to restructure our loans and sell PPOR to buy another PPOR. We have 2 investment propertys and at the moment are crossed. So the plan is to sell the PPOR pay down the investment propertys to 80% lvr so we can max out our borrowings to buy the new PPOR while not incurring LMI.
with the new PPOR loan we intend to have a offset account.So when its set up it should be 3 stand alone loans with one off set account attached and all 3 loans will be 80%lvr

Is this the best way to structure this or what is the alternative.

For future investment is it a better structure to get a line of credit so if we dont purchase to the max we have funds waiting there as a deposit.

Any comments appreciated

 

[Aaron_C]

Sounds fine in principle but why not uncross the IPs now?

 

[Emo21]

uncrossing now will require another LMI fee as values are below 80% LVR. The main reason changing now is for the new PPOR. I had thought about keeping PPOR but will need my wife to start working again to service the loan we would need (shes not planning on starting back at work for another 3 months)
So selling and buying i can uncross and pay down some of the debt with no extra fees, down side being less tax deduct-ability but may also open door for more investment.

 

[Aaron_C]

Ah I see. Selling the PPOR to pay off the debt sounds OK but maybe you can also uncross it when you are discharging the old PPOR after it is sold. This will make it a bit easier for you in the long run. You can do it with your same lender (assuming you service, of course).

 

[Emo21]

when i sell they will be uncrossed as they are crossed with the PPOR not each IP.
is it possible to set up a line of credit for the new PPOR and drawn down what we need and use the rest for future investment or is this complicating it. And if yes is it still possible to attach a offset to it as line of credit.

 

[Aaron_C]

when i sell they will be uncrossed as they are crossed with the PPOR not each IP.
is it possible to set up a line of credit for the new PPOR and drawn down what we need and use the rest for future investment or is this complicating it. And if yes is it still possible to attach a offset to it as line of credit.

Chances are that all 3 are crossed together, not 2 crossed with one another - so you have to double check that.

As for your question about line of credit for PPOR, yes you can do that. Usually strict line of credits and offset accounts are mutually exclusive because they are different types of loans. LOCs are indefinite whereas offset accounts are attached to term loans with a set lifespan. Similar operation of course but different legally speaking.

Best thing to do is max your LVR on the PPOR, stick the extra funds in the offset account/redraw and then use that later for investing.

 

[Terry_w]

morning. We are about to restructure our loans and sell PPOR to buy another PPOR. We have 2 investment propertys and at the moment are crossed. So the plan is to sell the PPOR pay down the investment propertys to 80% lvr so we can max out our borrowings to buy the new PPOR while not incurring LMI.
with the new PPOR loan we intend to have a offset account.So when its set up it should be 3 stand alone loans with one off set account attached and all 3 loans will be 80%lvr

Is this the best way to structure this or what is the alternative.

For future investment is it a better structure to get a line of credit so if we dont purchase to the max we have funds waiting there as a deposit.

Any comments appreciated

This means reducing your deductible debt and taking on higher non deductible debt - less than ideal. How much are you looking at to get the LVRs on the investments down to 80%?

 

[Emo21]

looking at about $45k on one and $60K on the other. at this stage the house are just negatively geared and with this pay off and the next rent increase will be positively geared. so the up side is this should open the way for the next investment.

not paying down the debt will greatly reduce the borrowing capacity

 

[Aaron_C]

looking at about $45k on one and $60K on the other. at this stage the house are just negatively geared and with this pay off and the next rent increase will be positively geared. so the up side is this should open the way for the next investment.

not paying down the debt will greatly reduce the borrowing capacity

Emo this is not correct. Paying down existing debt to 'increase borrowing capacity' is a false economy since you are just reborrowing what you already paid down. What you should do is uncross the properties, and if you need to pay LMI, it will be much lower because you have LMI on two different loans rather than 1 big one.

 

[Emo21]

This is what I got from my broker we where contemplating the first option.


Keeping Yangebup and assuming rental income from it will mean a borrowing capacity of $440,000, with the potential for a $110,000 deposit by maxing out your equity in the Yangebup property (TOTAL AVAILABLE: $550,000),
· Selling Yangebup and reducing debts to 80% will leave you with approx $136k and a borrowing capacity of $480,000 (TOTAL AVAILABLE: $616,000),
· Selling Yangebup and keeping debt levels as they are for tax purposes Will mean you will walk away with approx $263,000 and your borrowing capacity will be approx $210,000 (TOTAL AVAILABLE: $473,000).