Never heard of it!

Yes, probably. But make sure you set up a separate split for it. which you can do with St g.

In the future i wouldn't use a LOC for the main loan on an  IP as there can be tax issues.

As a broker? why not try one from this forum? I am not longer brokering.

You would still need to check serviceability as it depends on what other debts you have too. I suggest you see a broker.

For the LOC work it out like this. Value x 80% minus existing loans = max LOC. I would go for the max now. Then borrow 80% of the value of the ivnestment property separately. interest only. Use the LOC for deposits and only for investment expenses – don't pay anything into this except maybe the interest.

I think you are slightly confused.

To get the LOC you will need to give the bank the property as security for the loan. But you could then get another LOC on the same property later if you wished. you just have to keep the LVR under the banks limit – usually 80% of the value.

The point is you could use the money from the LOC to pay the deposit and costs for the next property and then go to the same or a different bank and borrow the rest and keep each property separate from the others and the loans not crossed collateralised.

eg
Property A, value $100,000
Loan 1 $50,000
Loan 2 $30,000 (eg. LOC on the available equity)

Go out and find property B value $100,000
Loan 3 $80,000

The 20% deposit and stamp duty etc comes from Loan 2. Interest on this would normally be deductible.

1 would be preferable.

with 2 you are borrowing money to put into a savings account, not to invest. If you later take the money out and invest it could be argued that the money is not borrowed and therefore the interest not deductible.

Something similar happened in the case of Domjan. Domjan borrowed money and parked it in a savings account before investing it. Full interest deduction was denied, from memory, as she had not invested directly with the money.

If you do do it, make sure you get written advice from your accountant first – and never put any cash into the offset mixing it with borrowed funds.

Not really – you are just using the PPOR as security. The interest on the LOC will be for the loan for the deposit and costs of the IP.

Do you mean borrow extra and put it in the offset until you use it?

I have done this myself, but wouldn't suggest you do it as you lose, or weaken, the link between borrowing money and investing it. If you were to place any other funds in the account your may break the link completely. Safer to use a LOC for the extra equity and the IO loan for the main part.

You will need to apply for a variation of security.

Each loan will need to be no more than 80% of the value of the property securing it, or LMI would be payable. You may get around the problem with IP3 by setting up an addition loan on IP 1, such as a LOC,  which is secured only by IP 1 and then using this to pay down the excess loan amount above 80% on IP3.

Tax deductibility depends on the purpose the borrowed funds are used for. Taking money from a loan account = borrowings.

So if you refinance the interest will only be deductible if the money is used for investments. If you set up a LOC to 80% of the value but deductibility will depend on what the money is used for.

If your loan starts off at say $300,000 and you pay it down to $100,000 and then decide to move out so refinance it to $300,000 again, the interest on the extra $200,000 will only be deductible if these funds are used for investments.

Whereas, if you had a $300,000 IO loan and put $200,000 in a 100% offset you will be paying the same interest but without the problems as if you remove the $200,000 from the offset the loan hasn't changed and the interest on the whole $300,000 will be deductible if the funds were used to purchase the house originally and the house changes to an investment property.