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December 25, 2015 - 12:36 am

Richard Taylor wrote:

In the past NAB and their spin offs (i.e NAB Broker, Advantedge, UBank etc) have taken the actual debt and applied a 28% loading to the interest rate which in many cased worked out better than a flat 7.4% P & I.
They are now moving to a calculation based over the remaining P & I term i.e if you have a 25 year investment loan with 5 years interest only the external debt will be worked on a 20 year P & I repayment.
Obviously this reduces the amount an investor can show they can service and appears to be another over reaction.
Cheers
Yours in Finance0-40 Properties in a decade. Ask me how.

Richard, I haven’t used NAB Broker for a while but the way I read their policy, the external debt is still assessed the same as before, and it’s only proposed new borrowings that are affected by the new servicing calculation based on remaining P&I term (confusing I know). The new serviceability calculator still adds a loading of 28% to existing debt so it seems it may be the case.

Cheers

Tom

• This reply was modified 8 years, 4 months ago by  PLC.

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October 7, 2015 - 1:14 am

Benny wrote:

Hi Pollardis,

The only way that is possible if you have another property you can borrow equity against

I agree with you – the wording probably should have looked more like this :-The only way that is possible if you have another property with equity you can borrow against
But then, I don’t believe that is the ONLY way – with the smallish amounts needed, a Personal Loan, or even a Credit Card could do the job.
Benny

That is true, but those debts would need to be disclosed which reduces your borrowing capacity by a greater amount than borrowing it against another property. And the interest charged on those borrowings might actually mean that LMI could come out cheaper in the long run.

Cheers

Tom

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May 28, 2015 - 1:22 pm

Interesting. ANZ and NAB have said that they are no longer offering discretionary pricing, but CBA and Westpac have “reduced” their investor discounts which seems to suggest they are still offering them in some format.

I just had extra discount approved for a Westpac investor deal, albeit being to renew a pricing discretion that had expired a month back.

I wonder if other brokers have tried with Westpac and/or CBA and had luck?

Cheers

Tom

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May 24, 2015 - 12:58 am

Terryw wrote:

inusure wrote:

( the one that is building/soon to be finished), and they told me that i can only get positive cash flow by purchasing this type of property.

Which they coincidentally happen to be selling.

Beware.

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Correct, when they’re suggesting property for you, you can be assured they will be receiving a commission for it that is added in the price. The effect that will most likely have is your valuation may tank.

Cheers

Tom

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May 13, 2015 - 12:50 am

Horses for courses. An online lender may work well for you, it may not.

Until you delve more into your personal scenario and go through your goals, you really won’t be able to tell.

Cheers

Tom

• This reply was modified 8 years, 11 months ago by  PLC.

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April 24, 2015 - 12:27 am

Borna Boltužić wrote:

Thank you!

Just to clarify, you both mentioned increased interest deductions, are you simply referring to the fact that the negative gearing amount will be higher and therefore can claim a higher amount on my income?

Yes, the higher the interest, the higher the deductions against the income of the owners on title.

Borna Boltužić wrote:

Another question, how would you structure the loan?
We are leaning towards interest only, but would you split some i/o and some p&i?
We have been quoted 3.99% 3 yr fixed by ME bank, what do people think about potential further drops in the cash rate and how they will affect i/r?

IP should definitely be all I/O, especially as you’re thinking of a PPOR down the track.

Fixed can be good if you’re looking at a set and forget type loan, or for when cashflow might be a bit tight and you would like to know your repayments for budgetary purposes. If it’s to “beat the bank”, then in the majority of cases you would lose out.

Fixed rates are also independent to the cash rate, and will rise or fall outside normal RBA cycles.

You should really see a decent broker who can go through your whole scenario and come up with a structure to suit you.

Cheers

Tom

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April 21, 2015 - 12:11 am

Hi Borna,

As Richard suggests, you will have some extra costs involved with a high LVR purchase for an IP, however they are normally tax deductible .

With the plan you are suggesting, it can be most beneficial to have as minimal a deposit on your first IP as your risk profile allows. Coupled with the right structure it will allow you to maximise any deposit for a future PPOR property, and maximise your tax deductibility down the track once the PPOR is purchased.

Cheers

Tom

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February 28, 2015 - 12:17 am

Noobugawa wrote:

Hum. I think banks tend to offer better variable rates for a single loan of a larger amount, say $1m loan can get var rates of 4.3% for example.

Not really the case. Total aggregated lending will likewise get you better rates, even if it’s multiple splits.

As for the OP, take heed of Terry’s advice. It’s spot on.

Cheers

Tom

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February 19, 2015 - 12:13 am

You should have received a quote from the broker upfront advising their fees to you. If not, then what they are doing in charging you contravenes the NCCP Act.

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Tom

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October 20, 2014 - 8:30 pm

It sounds like you are trying to salary sacrifice the car. This has its own advantages and pitfalls, and you should really see an accountant to make sure it is suitable for you.

As for the borrowing capacity, this all depends on how much your repayments are for the lease? That is dependent on the lease term, interest rate, etc. What that does is reduces your pre and post tax salary, and as a result reduces your borrowing capacity. It isn’t out of the realms of possibility that it may reduce your borrowing capacity by $220K, but it may be more, and it may be less. You really won’t know until you had all the numbers.

Cheers

Tom

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September 5, 2014 - 1:06 pm

adam.p wrote:

I was thinking along with what you said. I have cash funds that can paid off LOAN 2. If I paid off LOAN 2 and re-finance at the same time with the same lender and with the same amount with LOAN 2, would this be considered valid for tax purposes?

As long as the new loan was to be used towards the new IP purchase then yes, it would be deductible. However as you have different loans everywhere, you need to ensure the whole loan structure is setup correctly if refinancing.

Cheers

Tom

• This reply was modified 9 years, 7 months ago by  PLC.

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September 5, 2014 - 12:22 am

adam.p wrote:

Continuing with my new situation….

In summary from old post, I was refinancing to convert PPOR to IP. I ended up with:

1 x IP with:

LOAN 1 – Tax Deductible
LOAN 2 – Non-Tax Deductible because I used it to buy my PPOR

1 x PPOR with:

LOAN 3 – Non-Tax Deductible because it is used to buy my PPOR

Now, I’m looking to buy another IP. So the questions:

Can I now claim LOAN 2 as tax deductible? How do I link this LOAN 2 to say its purpose now is to buy another IP?

If the above is not possible, how do I convert LOAN 2 so it can be tax deductible?

Adam,

If you are still going to live in your PPOR then that LOAN 2 is not going to be deductible. If you made it into an IP then it will.

If you’re looking to buy another IP, what you can try dependent on equity position is take out a loan against either property to fund deposit + costs for new IP. That would be deductible.

If you don’t have equity but instead have cash funds you want to use, then you can pay down some of the non-deductible loans, and then take out a separate loan as above for deposit + costs for new IP for same deductible result.

Just needs to be structured correctly. As your situation isn’t totally clear in your post best to see a decent broker who can go through it all with you and get it done right.

Cheers

Tom

• This reply was modified 9 years, 7 months ago by  PLC.

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August 29, 2014 - 2:20 am

No, do not redraw the $50K whatever you do. As soon as you redraw it, you contaminate the loan at the current moment in time.

There is the option of either you or your wife purchasing the other half of the property from the other (I think what Richard was referring to as an option). Doing this will allow you to increase the loan size and keep the deductibility while still having those extra funds available. As the property is in Victoria, there is no stamp duty payable transferring to a spouse, the only cost is the paperwork itself.

If the above is not viable to you then the refinanced loan really needs to be structured correctly.

Cheers

Tom

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August 27, 2014 - 11:43 pm

Richard is right on this. The maximum you can claim on the interest is $185K. The $50K won’t be deductible.

If you really want the $50K in funds, then it would need to be done as a separate split to make things clean.

Cheers

Tom

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August 8, 2014 - 7:18 pm

Generally FHOG isn’t classified as genuine savings by lenders and can’t be contributed towards the 5% deposit.

Have you rented somewhere with an agent for a long term period? Some lenders take this as qualifying for genuine savings and then you can use other funds to come up with the 5%?

Some lenders also do non-gen, savings at 95%LVR, but they are normally more restrictive with qualification criteria.

Cheers

Tom

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August 5, 2014 - 1:02 am

Hi bns, like Jamie I’m not quite understanding the question you have posed, however he is correct in saying that if you are looking to pull equity out of the existing property for the new PPOR purchase then it wont be deductible as the purpose of the loan will determine deductibility, not the security it is based against.

The loan structure from the very start will be the most important factor here for you. A decent broker will be able to help you out and get you on your way.

Cheers

Tom

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August 5, 2014 - 12:38 am

Wow, if that is the advice the branch manager is giving, then I dare say he won’t be branch manager long.

Though I’m not surprised as bad advice like that is prevalent from both banking staff and/or brokers. Just need to weed the bad ones out when looking for a good one.

Good to hear you set them straight Solomon.

Cheers

Tom

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July 21, 2014 - 11:34 pm

Agree with the others.

With the figures you have given, you have about $130K to play with in equity with your current property (before incurring LMI). However structuring this equity release is critical to give yourself the maximum deduction possible come tax time.

This is where a decent broker can be a enormous benefit.

Cheers

Tom

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June 27, 2014 - 1:22 am

As others have mentioned, unfortunately the equity you pull out for a PPOR wont be deductible as purpose of the loan determines deductibility, not the security it’s based against.

You need to make sure the existing $250K loan and $100K equity loan are separate loans and not one mixed one otherwise that will create a mess. Also the IO as others have mentioned.

Basically structure the loan correctly from the start and it makes it so much easier for you long term.

Cheers

Tom

• This reply was modified 9 years, 10 months ago by  PLC.

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June 27, 2014 - 1:11 am

Hi magic,

Unfortunately it doesn’t work that way. Lenders still add a standard buffer to fixed rates for serviceability purposes (as these products revert back to a variable rate at the end of the fixed rate term).

Westpac and St George used to allow a buffer of only 0.5% on fixed rate products of 3 years or more, however they have stopped that practice now from what I recall.

Cheers

Tom

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