Selling a property and keeping an investment loan secured

[Ninga cat]

Hi everyone

Have a query about selling our PPOR which has two loans secured against it. PPOR will sell for 600k. There are two loans secured on the property, one for 350k and one for 100k. The money drawn on the 100k was used purely for purchasing investment properties and repayments are deductable. Ideally we would like to pay out 350k and keep 100k loan open secured against the remaining proceeds of sale (150k) until we find another PPOR to purchase. Then purchase new PPOR opening a new loan for amount required plus resecuring 100k investment debt on new property.

Unfortunatly current lender ING won't secure 100k against 150 cash in deposit account....??. All I am trying to do is NOT pay out the 100k debt because accountant advises as soon as debt is paid down we can't redraw another loan for the same amout and continue to claim repayments.

Can anyone suggest a way out of this situation? Thanks or any replies

 

[Aaron_C]

Loan increase on your investment properties to pay out this $150,000 loan? Then you got more cash available after the PPOR sale which may preserve its deductibility.

 

[Ninga cat]

Hi Aaron
Thanks for that, yes, I could siphon off IP's to pay out 100k but I was hoping to do that next year use as deposits for next 2 purchases..... I suppose if we pay it out could go and probably go an apply for another loan to use for deposits as overall debt will be lower.

 

[Terry_w]

Speak to your tax advisor about setting up a strategy involving a trust.

I would need to think it through properly, but on settlement the $100k loan can be refinanced with the trust as the lender and mortgagee. mimicking a bank. It will just be like refinancing with a third party, which it essentially is.

Once the new PPOR is found the loan is refinanced again from the trust to the new PPOR.

 

[GaryT]

Is it possible to restructure existing IP loans to include the 100K and effectively transfer the mortgage for the 100K to other existing properties?

On your next IP purchases, try to limit mortgages to individual IP properties if at all possible i.e. one loan to one property. (Also mindful to eliminate the ridiculous mortgage insurance.) I know the banks want to include as much as possible for security but you can shop around. This makes it so much easier to sell/upgrade whilst maximizing interest claims and eliminating private debt.