If you go 80% LVR on the PPOR, then you can always increase the LVR on the investment loan and pay LMI on that (it doesn't have to be limited to 80%).

You mentioned that you paid LMI initially on your PPOR loan, so if you topped up the loan by $100K, it wouldn't be charged on the full amount, but you would need to pay some more. You would need to…[Read more]

You need to be aware that if you are applying for the FHOG, you will need to live in the property for a period of at least 6 months commencing with the first year, so no rental will be coming in during that time, and needs to be budgeted for.

Cheers

Tom

Location does play a part in investing but it is not the be all and end all.

There is no issues with investing in suburbs with a lower than normal economic-social profile if there is potential for nice yields and capital gain.

Cheers

Tom

As per what Terry said above.

You don't need to borrow the full $100K against the PPOR. You can juggle the figures around to come up with a better scenario where LMI (if applicable) is lower.

Cheers

Tom

Yep, as long as the borrowings taken out against the IP security were completely for the IP and/or other investments, the full amount of interest is deductible. 

Cheers

Tom

Hi prospector,

As Richard mentioned, your loans were cross collaterised, hence the huge LMI cost. Just doing some quick figures with ANZ LMI, you would have saved thousands if the loans were separate for each security which is how they should have been structured as a worst case scenario.

Also being cross collaterised, the borrowings are mixed…[Read more]

Not a fan of apartments in the Melbourne CBD or nearby Docklands. Seems to be over saturated with supply, and more and more going up all the time. Prefer something further out in suburbia, but that's just me.

Cheers

Tom

Cheers Richard for the clarification.

Will keep an eye out for the pogo stick lender. Think I came across them once before when I convinced them to discharge some magic beans in exchange for a cow.

Cheers

Tom

Theres one thing in the scenario above that has never been totally clarified to me in terms of tax deductibility of LMI.

Taking Cham's situation where he is using equity in his PPOR for a deposit on an IP. Using his figures of:

PPOR loan – $300K
IP loan – $100K
PPOR value – $480K
New LVR – 83.3%

Say for arguments sake assuming no LMI paid…[Read more]

As Richard pointed out Adam, its the purpose of the loan that is the determining factor.

In you case, the purpose of the funds is to pay out a loan which was used for deposit and costs for the new PPOR (LOAN 2), that is a personal nature and therefore not deductible. All you would be doing is shifting debt around.

Cheers

Tom

I thought it would all depend on the title. You mentioned it is shown as a road, classified PUZ1, which is public land. Though as others have mentioned, best to see a professional to confirm things.

Cheers

Tom

Adam,

When you have non deductible debt such as a PPOR, it is advisable to put any excess money into an offset account linked to it. In your situation above, really no need for the offset in Loan 1.

With your comments under loan 2, it doesn't matter what you use the funds for when withdrawing the 50K in the offset. It's cash and has no effect on…[Read more]

Hi Kat,

As Terry mentioned, if using for investment purposes, it would be best to create a separate Line of Credit or Interest Only loan and utilise it at the time it is needed. To claim interest on investment borrowings, the ATO likes to preferably see a direct link between the borrowed funds and the item it is being used for.

Your broker…[Read more]

Cha,

Try to think of it in something else other than buying property.

Example: You borrow funds on either an investment property or PPOR (say $20K) to buy for yourself a stereo, TV, Playstation 3, toys and games, and the rest you gamble away. Now do you think you are able to claim the interest associated with this portion of the loan (the $20K)…[Read more]

Adam,

You are correct to split IP and PPOR loans to make them separate. Doesn't mix borrowed funds with personal and investment.

However it would more look like the following:

Using Security A (PPOR > IP):
Loan 1: IO, no offset, amount – $218K
Loan 2: (separate split from the above): P&I, optional offset*, amount – $50K

Using Security B (New…[Read more]

Hi Cha, others above have answered your first question.

In regards to your other questions, lenders generally offer interest only loans either up to 5 or 10 years, but in most cases they can be rolled over into a new term again when the initial period ends.

Also interest only rates are the same as P&I ones.

Cheers

Tom

Terry is correct Adam.

It's about the purpose of the borrowed funds, and from your scenario, the $50K you borrowed on the first PPOR goes to purchase a new PPOR (personal use) via the offset account, which means no deductibility.

Cheers

Tom

Hi Terry,

My sister bought vacant land last year which was onsold to her before settlement. The person who initially purchased it (about a month or so before) wanted to sell at a minor profit (which my sister accepted), but found out that if they did that, they would be liable for stamp duty which would have meant a loss. However they were…[Read more]

Yep, it was initially bought from the vendor as a dutiable transaction and stamp duty is applied, and then sold to a subsequent buyer as Terry mentioned which is also a dutiable transaction with stamp duty applied. The government likes to get its hand in the pie whenever it can.

Though I think there may be a loophole where you can get out of…[Read more]

Nathan is correct Cha.

Its the purpose of the loan rather than the security it is borrowed against that determines deductibility. Since you will be using the $220K on a home to live in (i.e personal) then it is not deductible. You will only be able to claim the amount that is originally outstanding when it becomes an investment ($40K).

Cheers

Tom