Forum Replies Created
Hi PC77
Firstly welcome to the fourm and i hope you enjoy your time with us.
In regards to your first question you are certainly better off to consult an Accountant who can weigh up your requirements and recommend a suitable vehicle. Just educate yourself a little before you go and see someone as many clients end up buying a Trust structure and then realise the issues in either financing the new property (not applicable for a simple DFT or UT structure) or dont understand what they can and cannot do in regards to any potential negative hearing claims.
Realistically the only way of accessing the equity is to take out a sub loan on one of the properties and use this is as deposit and to cover the acqusition costs. Sounds like the IP might be rather tight although have more available equity in the way of percentage terms so looking at the PPOR might be the way to go.
If you dont need all of your current savings you would be better of to pay off some of the PPOR loan and then increase the sub loan accordingly. I.e pay down $20,000 and take out a equity loan of $20,000 plus the extra funds to take the loan to say 90% lvr.
Dont use your own savings especially when you still have non deductible debt outstanding.
Of course without further hard data in regards to the purchse price of the new IP / where it is located it is difficult to comment further.
Not knowing with whom your current loan is with makes assessing whether they will do a 90% equity loan hard so such recommendation needs to be quantified further when additional information is to hand.Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Greg
Hate to say funding the deal is not that easy and i have done 1 or two or a couple of hundred.
Firstly getting standalone 95% lvr on single dwelling isnt going to be easy as the mortgage insurer will go through you with a fine tooth comb. The loan will be fully credit scored so you would want to stack up real good.
Secondly you would want to make sure you are only paying land value because remember as soon as you demolish the house that is all you would have and the lender is going to be very cautious. Angel 13 hit the nail on the head with his comment. If you pay $210K and the land is only valued at $200K you will only be borrowing against this figure.
Thirdly you are really on going to be borrowing against cost as in the current climate the valuer is going to value the land and then place a dollar figure on the construction which is likely to be exactly the same as the Fixed Price Contract + any other fixed price quotes for landscaping etc etcYou are going to have to fund the Soft costs yourself and cover the interest.
Many lenders will not take the potential rent into consideration so you need to be able to demonstrate that you can service the loan during construction and meet the interest repayments.
All in all can be done but i doubt you will get 95% lvr across the board. If you dont score well 90% could even be a push.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
He has the advantedge of the hard data such as loan amount etc etc so very difficult for us to comment on specifics.
I am still not sure why you would want to switch the loan product when you could merely go interest only with the mortgage simplifier. as there is no account keeping fees.
Do an equity loan with redraw, place the new PPOR funds in there and stick the offset account on the new property.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
No definately not s there will not be any discharge or registration of mortgage for starters.
ING have an Orange product which is their offset package and depending on the loan amount will have much the same interest rate as the Mortgage SImplifier. Your Broker wrong is misinformed.
In saying all of this i am slightly lost as to why your Broker would suggest IO with 100% offset when you are renting this property out and intending to move into a new PPOR. Wouldn't the Offset A/c be better on the non deductible new debt.
Secondly if you only raise 20K towards your PPOR and are not putting in any cash yourself then the loans would have to be cross collateralised so as i mentioned initially i am not convinced your Broker has any idea about loan structure.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Firstly welcome to the forum and hope you enjoy your time with us.
Dont want to knock your current Broker but sounds to me like he has no idea on how to structure the loan to maximise your Tax deductions. it is not matter of merely refinancing and increasing the loan amount.
Now as far as lenders are concerned the service levels with Suncorp are absolutely terrible so on go this route if you are not in any sense of a hurry. Not sure what ING product you are on but there is no reason why you cant do a product switch. You can certainly have an interest only with 100% offset account (Assuming the loan is thru a mortgage manager who may have limited product chocie) however your Broker will not earn as much if he keeps you with the current lender.
Certainly many Brokers like to encourage regular refinancing to keep the level of remuneration up.
My philosphy is dont refinance for refinancing sake and only do so if their is a clear benefit for the client.
I guess each Broker to their own.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Really i would have though Jamie was just as knowledgeable and Professional than anyone from Acceptance Finance.
As Jamie has mentioned depending on the numbers looking at buying your wife's interest in the current property may well be a worthwhile proposition even given the potential Stamp Duty consequences.
More hard data would be required however certainly worth doing the exercise to see the level of savings.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Yes it all boils down to the "Purpose Test" to see whether the interest is deductible or not and not the type of loan or security offered.
You coul;d take out the P/L and then at the same time apply for the Top up IP loan.
As long as the funds from the IP loan are used to repay a debt where the purpose was investment the interest will be deductible.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Course Shock apologies sometimes we use acronyn's and expect members to know what we are talking about.
Ask away.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Good to hear the Manager of the largest Bank in Australia giving advice contrary to the ATO guidelines.
Nothing amazes me these days ….
You always do a personal loan and then apply for the top up to your IP loan to repay the P/L.
That would be quicker and keep the interest deductible.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Sorry for my tardyness in my lateness to respond to this question.
Development finance is a whole new ball game but with past experience they should be able to borrow against the end value or Gross realisation net of GST. Serviceability is not necessarily an issue of the margins are right.
In regards to whether they can purchase another IP in the meantime this appears possible and Lodoc should not necessarily be the immediate way they should look at going. We do many self employed full doc loans but of course without a little more hard data it is difficult to provide an exact answer.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Andrew website is http://www.allenrealestate.com.au/
Phone # 1300 443 581
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Yes when i look at a working week i am amazed how many hours i spend reading things i already now or completing information on forms that clients never ever read.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Totaly agree with you.
Same in the Financial Planning industry i find the number of selfish money grabing planners out there means if you do the loan correctly the financial planing work walks in the door.
God we are gluttons for paperwork lol
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Pete
Must admit slightly biased coming from the South and one of the projects we purchased for clients was down at Winchester but of course as always the North being cheaper attracts the better yield.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Shock
Firstly welcome to the forum and hope you enjoy your time with is.
The response to your questions will depend on a few factors so i will answer each separately.
Q.Shall I leave the 100k on the offset account?
A. You want to keep the loans separate although finance 100% plus costs so it is merely of matter of how you structure this. If you feel you need to keep some cash for rainy days then I would look to take out maybe a 90% lvr on the land and construction and an equity loan on the PPOR. On the numbers you have given it is likely the equity loan will take you into LMI territory so you may decide to pay down the home loan portion with say $20K from the offset and then take out an equity loan for say $48,000.$550,000 x 80% = $440,000 – $412,000 = $28,000
Reduce PPOR loan by say $20,000
$550,000 x 80% = $440,000 – $392,000 = $48,000 Sufficient to cover 10% deposit plus any associated costs.If you can live with less cash then you might increase the amount you pay down on the PPOR loan and increase the equity loan so that you only need an 80% land and construction loan. Course reduced equity if you decide to repeat the exercise fairly quickly.
Q.Shall I use it to buy the land?
No no no no no. The interest on the investment loan (land and construction is Tax deductible) so you want to maximise your deductions. Interest on your PPOR is not Tax deductible so you want to minimise the intrest being charged.Q. Do you guys go interest only or P and I?
A. Answer to this goes hand in hand with the previous question. Dont pay down your deductible debt whilst you have a non deductible interest bill. Interest only will be charged on the land and construction during the building phase but ensure that the loan stays this way post completion.
Probably a bit of fine tweaking and these numbers will work in your favour to meet your circumstances. It is something your Mortgage Broker should be able to offer advice and do the calculations for you on various scenarious.
Just make sure you structure the deal correctly to avoid the loans being crossed.Any questions just ask.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Terry i must say i scratched my head when i read that and asked myself why oh why.
As i think as Jamie and i have mentioned before when you are not filling out Preliminary Assessments, typing out quotes, undertaking Diplomas and updating your CPD points or getting ready for an ASIC suprise audit you get chance to write some loans.
The further amendment to NCPP October 1 i think was the last straw with many who just "You have to be kidding me" and left the industry. FAST who i am with have lost 20% of their Brokers since July and with FAST like Plan you are left alone to do your own thing so not a matter of being a newby these are hard core Brokers who have decided to exit.
I am sure you will find Law is less bogged down in paperwork than Mortgage Broking lol
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Sorry i am not Terry or Jamie but maybe able to offer an opinion.
I think i would be pushing the Bank to do the Top up loan now rather than later.
As long as you can justify the costs thru quotes there is no reason why they would say No.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Carl for my 2 cents worth i am unsure why you would paying down a IP with vigour when you have a non deductible PPOR debt.
By all means pay down investment debt if that is your strategy but NOT when you have other liabilities.
As Shane has mentioned you will now pay Tax on the rental income yet have less deductions by way of an interest expense.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Wow what an incredibly complicated structure your Broker has set up for you and as the boys have mentioned could end up costing you a pretty penny.
Before you rush might be an idea to take stock of the situation switch mortgage brokers and get the structure right before you proceed any further.
Always try and get the individual loan standing on its own two feet secured solely against the individual property.
Without further hard data it is difficult to comment fully but sounds to me like a wee bit of a mess.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Fell off the ride on mower at the weekend so will answer as follows:
Live in large detached house 8 kms from the CBD on a big block and personally wouldnt swop it.
Dont think i could squeeze 5 of us and a dog into a 2 bedroom CBD apartment.Keep those for my tenants as they rent darn well.
Age oh Yes 47.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
