Hi Wenever

You have heaps of equity so heaps of potential. The first thing you should consider is making both loans interest only. Set up a LOC on each property for the equity up to 80% LVR (this may not be easy in this climate).

Then you need some expert tax advice. You can structure the investment property in such a way that will pay off your home loan sooner. I roughly worked out that for every $100,000 in a LOC you can pay an extra $6,000 off your PPOR loan over and above what you are paying now. Your case may be much more.

At the same time you can also start investing in further properties (and making further savings).

You should look at setting up a discretionary trust. But you need to be careful on who you put where in it so as to maximise borrowing capacity. I would recomend 2 trusts with only one partner invovled in each. This will enable you to borrow more, ie increase long term serviceability.

You could buy in the SMSF, but I would suggest you don't because any equity developed there won't be accessible. Look at shares maybe.

Whether you should sell the child care centre would depend on if you think it is going to increase in value. Selling means CGT, and other costs, so it is only worth doing if it is underperforming.

It doesn't matter what the security is but what the funds are used for. Keeping the second loan separate to the first will allow access to the equity in the home and this loan can be used solely for investments and all the interest claimed.

Subsequent purchase should be done using the same method. As equity increases you just set up a new loan on each property and use that as deposit and costs for the next one.

Factor in placing the extra funds from the tax savings into the home loan too and it gets even better.

And, maybe buying high yielding shares with a LOC and getting a margin loan and letting both the margin loan and the LOC capitalise while you put all dividends and tax savings into the home loan.

Any lender will borrow that much, but what you want is for them to lend!

And yes there are still lenders who will lend up to 95%, though 90% is more common.

LOCs are usually 80%, though some are up to 90% with LMI.

thats about the limit of my knowledge. You will have to check with your accountant regarding depreciation as it only applied to properties purchase after a certain date.

based on the about I would say your taxable gain would be no more than $50k. – but i am not a tax agent so may be wrong.

Hi JOhn

Yep, keep saving into the offset if you have no other personal debt. Then ideally you will have a larger deposit for the PPOR when you do buy it.

Sounds right. They will need to see all proof of incomes etc again. While you are at it tell them NAB have offered you 5.79% and you may leave if ANZ can't match.

Make sure you get the loan IO for as long as possible, 10 years I think, and with the offset account attached.

I was suggesting you split the loan like Richard said. Pay down the loan and then reborrow the money again, but have this new portion as a separate loan.

But you have little equity at the moment and it may not be feasible to do it this way. It may result in LMI again if you borrow more than 80%.

i am confused by what you wrote above. You only rented it out for 5 years but have held it for 19 years.

Did you live in it prior to renting it out?

If you have $380k cash to spend I would pay this onto any existing loan which is non-deductible. Then reborrow it (so the interest is deductible), by setting up a separate split, and use it for the investment property. Usually you would just used 20% deposit from this and borrow the remaining 80%.

I too would shy away from a LOC as you can get a lower rate on a standard IO loan with free redraw – but you won't need redraw as you should put any extra money onto your non-deductible debt first and then once that is paid off into your offset account.