Split equity loan into two loans?

Hi all

Currently have no PPOR but IP1 with 210K IO loan with ANZ (Breakfree package) and $110K in equity which I am planning to use together with $45K in savings to finance two properties - PPOR and IP2.

To keep tax accounting simple I am guessing I should be drawing two separate equity loans under the Breakfree package so it looks something like this:

$210K IO existing tax deductable loan on IP1
$60K IO tax non-deductable equity loan for PPOR deposit and costs
$50K IO tax deductable equity loan for IP2 deposit and costs

I believe with ANZ Breakfree Package would be able to set up the two equity loans at the same time without incurring extra fees and use that opportunity to get as much equity out at once rather than doing the loans in two stages.

I would then approach a different non-ANZ lender for a loan for PPOR and yet another non-ANZ lender for a loan for IP2.

The reason I would make the PPOR loan IO is that it will most likely become IP3 in a couple of years.

Yes I will be approaching a mortgage broker (someone from SS) before I take the plunge, just trying to get a rough idea in my head before I proceed next year.

Thanks in advance!
 
Heya, you've got your thinking pretty spot on.

Yep, good idea to have it split to avoid contamination of non deductible and deductible debt and future tax issues.

One bit of advice is to borrow as much deductible debt as possible (ie to finance the new IP). Use your cash for the PPOR.

Can I ask why you need to go to three separate lenders? GIven you're already paying a breakfree package, it may be best to have first couple loans with ANZ. Your broker will just need to make sure their now X-coll.

Good idea to make it IO and pay it down via offset - although IO high LVR PPOR loans are likely to get more and more difficult to obtain. As of policy today, it should be fine.

Cheers,
Redom
 
Also consider ING's no LMI 90% product - it is P&I and serviceability may be an issue, but one that your broker can do the numbers on and see whether its worthwhile.

Cheers,
Redom
 
Thanks Redom

Three different lenders was mostly paranoia about X-coll but you're right the broker should be able to make sure they are not X-Coll.

Another reason was we might approach tighter lenders for these two properties and leave the more flexible lenders for later properties when getting loans is going to be a bit more difficult? Possibly also get a better interest rate than ANZ for the PPOR loan.

Following your advice to maximise deductible debt:

$210K IO existing tax deductable loan on IP1
$42K IO tax non-deductable equity loan for PPOR deposit and costs (with $19K cash)
$68K IO tax deductable equity loan for IP2 deposit and costs (with no cash)
 
Thanks Redom

Three different lenders was mostly paranoia about X-coll but you're right the broker should be able to make sure they are not X-Coll.

Another reason was we might approach tighter lenders for these two properties and leave the more flexible lenders for later properties when getting loans is going to be a bit more difficult? Possibly also get a better interest rate than ANZ for the PPOR loan.

Following your advice to maximise deductible debt:

$210K IO existing tax deductable loan on IP1
$42K IO tax non-deductable equity loan for PPOR deposit and costs (with $19K cash)
$68K IO tax deductable equity loan for IP2 deposit and costs (with no cash)

X-coll can be easily avoided - just read the 'security' part of your loan contract very carfefully.

As per other thread, NAB/CBA are your go to lenders. Their good with new employment/probation. NAB will even allow you to borrow without waiting for your first payslip (future employment contract will do).

If you run into servicing issues, split lenders up and go with NAB for the last transaction.

Cheers,
Redom
 
Thanks Redom. The lease on the flat I am renting in runs out at the end of March so it would be nice not to have to sign another 6 month lease if I can get finance for PPOR at least, happy to be more patient for IP2 as long as it's sometime in 2015.
 
Plenty of time to get it done. If you want to purchase before you start working, best to go with NAB. Just make sure your broker maps out a path to get you your IP2 too. This will ensure your set to achieve both goals.

Cheers,
Redom
 
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