Using IP For PPOR

[MichaelPark]

Hi all,

In the final stages of purchasing a PPOR and in a few months my IP will be coming off a fixed loan.

I was just wondering what people do with the equity from the IP? If it's not enough for another IP, do you put it in an offset account for your PPOR?

IP is worth roughly 340k with a loan of 240k. So would we be best putting 80k (80% LVR) into an offset account?

Also having 2 loans with 2 separate banks, is it worth consolidating? My partner gets a family discount from the bank we have our PPOR with. Just wondering where we are to go from here to maximize all our cash/investments.

Thanks,
Michael.

 

[marg4000]

I was just wondering what people do with the equity from the IP? If it's not enough for another IP, do you put it in an offset account for your PPOR?
.

No advantage in doing this, but several disadvantages.

The interest on the redraw would not be tax deductible as it is going into your PPOR. Further down the track, if you then invest this money then it will still not be tax deductible as it will be considered the purpose of the redraw was to put it into a bank account (offset) in your name.
Marg

 

[investor2009]

As Marg said

What to do with equity? Buy more IP's!

 

[MichaelPark]

What if someone didn't have enough equity for another IP?

 

[marg4000]

Wait a bit and save.
Marg

 

[MichaelPark]

How do you go about re-evaluating your current IP?

 

[Terry_w]

IP is worth roughly 340k with a loan of 240k. So would we be best putting 80k (80% LVR) into an offset account?

Also having 2 loans with 2 separate banks, is it worth consolidating? My partner gets a family discount from the bank we have our PPOR with. Just wondering where we are to go from here to maximize all our cash/investments.

I would suggest you set up a LOC or an IO loan (new splits) and have the money available to borrow but not to actually withdraw it until you need it.

 

[MichaelPark]

I would suggest you set up a LOC or an IO loan (new splits) and have the money available to borrow but not to actually withdraw it until you need it.

LOC, how would we go about that?

Speaking round figures,

Joint income: $110k~
PPOR: $340k, $300k loan
IP: $330-$345k, $240k loan - Rented for $335p/w.

IP is due to come off fixed in a few months, are we servicable for a LOC? How do they work out if we are? It would be really great if we were able to do so.

 

[Terry_w]

LOC, how would we go about that?

Speaking round figures,

Joint income: $110k~
PPOR: $340k, $300k loan
IP: $330-$345k, $240k loan - Rented for $335p/w.

IP is due to come off fixed in a few months, are we servicable for a LOC? How do they work out if we are? It would be really great if we were able to do so.

You generally can borrow up to 80% of the value of your property without LMI, so $330k x 80% = $264,000. Less current loan of $240k = $24k LOC. Not enough maybe so you could take the LVR to 90% and borrow more.

Servicebaility is a more complex calculation and you should speak to your broker.

 

[Colin Rice]

IP is due to come off fixed in a few months, are we servicable for a LOC?

Lenders will look at money in v money out and whats left is used for servicing debt.

Depending on what other debts, credit card limits, number of dependents you have amongst other things will determine whats left to service debt.

The serviceability calculators vary significantly from bank to bank so if yours says no doesn't mean another will not say yes.