your PPOR should only be security for the LOC (and original loan). The IP should be the only security for hte investment loan.

You should not be paying the investment loan fortnightly as this would mean extra repayments – these should be going to the PPOR loan (not the loc) as this is non deductible.

IO would revert to PI.

Why is the loc interest rate so high? If that with a different bank?

Let me respond in order
1. Yes, insure for all risks
2. There are some tax benefits – see below – and general structuring benefits
3. Yes
4. Depends who owns the units – units are property so would be dealt with under a will whereas the trustee owned assets such as hte house wouldn't.

I think that hyrbids can still be useful even if it wouldn't seem to give any benefits initially.

Imagine a HDT buys a property. X borrows to buy units. 10 years down the track the property has double in value. X thinks it is time that this property was placed into a discretionary trust. If the property was in his own name he would have to sell it to the trust – title deeds would change.

But as this is in a HDT – which is essentially a unit trust at this stage – he has 2 options:
1. Transfer the units to a discretionary trust – stamp duty and CGT would apply. But not change in trustee or legal owner – ie no change in title.
2. The trustee could buy back the units from X. CGT and stamp duty would apply.

Stamp duty would generally be cheaper to transfer units than the transfer land. CGT could be reduced by selling the units in stages over  a few years. And with 2 the trustee could borrow to buy the units and to claim the interest on this as a deduction.

It may also be possible to transfer teh units to a SMSF near retirement – many issues involved here.

Forget the selling in portions bit – it just won't work.

Recently it took me 14 months to sell a property – you may have to reduce the price further and change agents to get a result.

A caveat is notice to everyone that someone else has an interest in the property. It may or may not prevent the dealing with that property – such as mortgaging it or changing names. However someone with a caveat could have their interest take priority over your interest.

eg. in NSW there is a case Black v Garnot. I forgot who is who, but the seller of the property had money problems. The purchaser paid the 10% deposit and on the day of settlement the solicitor checked the title – looking for any last minute caveats. After checking they went to settlement – about 2 hrs later. It was during this time that someone who had a debt owed and had a judgment actually lodged a caveat on the title. They had a writ to take possession of the property and the question was who had the greater priority – the person with the writ or the person who had paid the deposit but hadn't settled yet.

It turned out that both had interests in the property and both could have protected these itnerests by lodging a caveat. The one who lodged first was deemed to have prority over the one who didn't.

Therefore in NSW now it is recommended that lawyers advise clients purchasing proerties that they should lodge a caveat after exchange of contracts.

Yes, could be done but would be very costly and you would probably need a prospectus lodged with ASIC.

Also many tax issues.

You should also consider the CGT exemption available for first moving in and then out again – the property can be exempt for up to 6 years while you are absent and you still get to claim all the usual expenses.

You could buy it off her.

split your loan.

If you use redraw then it will be one big loan. part of the interest will be deductible and part won't

So you need to set up a new loan – split into different portions. Then the whole of the interest on the portion used for investment should be deductible.

If you have one combined loan then every repayment will come off the one loan and you will be reducing your non-deductible debt. which means losing tax deductions which means losing money

Yes, the general rule of thumb is to pay down private debt and to borrow for investment.

But, before you do pay it into the loan make sure you can demonstate serviceability – you should restructure the loan so you have a new split rather than just using redraw. The bank may want to reassess you again.

Hi

No, I don't generally drink alcohol. Just a natural bad speller