Split P&I > P&L/LOC

[Jazza]

Hi all,

Just after some advice/clarity on what's probably a basic question.

I've got a P&I loan, with about 1/2 of it available as redraw due to faster than expected repayments over 18 months.

I'm ready to buy an IP and have $$ for deposit but would prefer to use deductible deposit $$ from a split IP-only LOC rather than from a PPOR redraw.


Question is this: If I modify the loan by splitting it in half as 'existing PPOR P&I with owing balance'/'new split IP LOC with nothing owing on this half when split' does this trigger 'early repayment' fees?


I'd assume that since the original loan product still stands and the balance simply decreases it won't and there is no 'break fee' for P&I in this case.


I've phone the bank and got the usual 'you will have to apply to get the exact cost' - and then pay whatever they hit me with.

Anyone who's done this or any MB's I'd appreciate your input.

Thanks,

Jazza

 

[Qlds007]

The funds on the redraw will not be deductable so you would better off to cancel the payments in advance and take out a separate LOC or similar against the available equity.

Keeping the loans separate will make it easier to identify the interest charged on the deductable portion.

Why dont you put your available cash in an offset account to reduce the interest charged on the non deductible loan. In fact i would probably be switching it to IO from P & I.

 

[Jazza]

so...

The funds on the redraw will not be deductible

I realize that, that's why I want to convert that half to LOC split to use only as IP related $$ - since it would be full at split and drawn only to invest elsewhere (or am I wrong?).

..so you would better off to cancel the payments in advance and take out a separate LOC or similar against the available equity.

Isn't that what I've said above 6 of 1, half dozen of the other? If not then I don't follow you, sorry.

Keeping the loans separate will make it easier to identify the interest charged on the deductible portion.

Agreed. Exactly what I'm trying to achieve. Just not sure on the mechanics of it.

Why don't you put your available cash in an offset account to reduce the interest charged on the non deductible loan. In fact i would probably be switching it to IO from P & I.

Don't have an offset with this loan, hence current question.

I'd planned/calculated to be in this position in another 1.5 to 2.5 years time, when there would be no early payment fee, I'm just ahead of schedule. (yay!)

Would this trigger early repayment by splitting in this situation?

Thanks for your help.

 

[Rolf Latham]

Hiya

would depend on lender.

The question is a bit like how much petrol does the car use..........

In general, most lenders wont charge a def where you are doing what you want to do.

ta
rolf

 

[Jazza]

Thanks.

The theory of it makes sense largely, but putting all the loan structures in place isn't something I'm good at yet.

Will be seeing a MB next month.