There are 2 major LMI companies. It looks like one doesn't like that area, so you need to find a lender that uses the other LMI company which can do the area. Going to a lender direct, you wouldn't know who they use for LMI, so you could be wasting your time. That is one reason to use a knowledgeabe broker like Richard.

Chan Naylor also claim their trusts are able to last more than 80 years.

Hi

Everyone (adult residents) gets the $6,000 tax free threshold.

Some lenders, or maybe most, allow certain expenses to be added back to income for serviceability purposes. This can include non cash expenses such as depreciation, certain interest,, and one off expenses. have a look at his deductions and see if any could be added back and then make the case to the lender.

This is good advice. No sense in using the deposit for the IP while you still have bad debt.

Once you plonk the $40,000 into the home loan, the interest will reduce. Nearly all lenders calculate interest on the daily balance. The monthly repayments will still stay the same, with the principle portion getting larger as the loan decreases.  No need to tell the bank anything.

Some banks may even recalculate the monthly repayments to keep the loan term the same, so they will only take the min repayment.

Making weekly repayments will save you a bit of extra interest as the loan money is hitting the account quicker = small daily balance = less daily interest. But if you are depositing your money into your offset as soon as you get it, this is the same as paying it into the loan.

One other tip, to keep the new property separate, it may be an idea to set up a separate loan account with your current lender, like a LOC, and use this for the deposit for the next one. Use this only for investment purposes so you can claim all of the interest. And, as your PPOR increases in value, you can keep on increasing this LOC and buying more property.

Hi Blueheeler

I think these PITs are jsut hybrid trusts. ie a discretionary component and a unit component in the same trust.

Hi Nicole

Why sell your home to only buy more property? This means you will incur extra costs. Having you considered just increasing the loan on it and using this as deposits for a new more?

For long term capital gain, I would prefer houses. Buildings depreciate, but land just keeps on going up (usually?). It is also much easier to add value to a house. eg. it is hard to add another room to a unit!

Buyers agents can be expensive, so you may be better off using their fee for another deposit. But they can also find good properties sometimes which may save you more than the fee.

I would go to an accountant to ask questions on tax issues and structuring issues – eg whose name should you buy the next one in etc. But bear in mind some accountants have narrow views and they may just be trying to save you a few $$$ in taxes now, while not considering the long term effects.

Hi BS

This is a common question.

Firstly, you will not be able to get any tax advantage by mortgaging your existing home now. ATO looks at the use of funds.

So, you will have the existing home without a mortgage and will be renting this out. This will create extra income and you will need to pay tax on this.

And you will need to borrow to buy the new house. So you will be paying interest on this loan, but this will not be tax deductible as it is for personal expenses.

One way around this is to sell and put the money released off the new home, and then buy another investment property. But this has various costs involved including agents fees, legals and the biggest one – stamp duty.

If you wish to keep the existing one you could always consider selling it to yourself. eg. If the wife buys the husband's 50% share 50% of the value may be released and this money can go off the new home loan. Stamp duty will be less this way.

Another option would be to sell to a trust you control.

You will need to calculate the rough costs to do this and then work out the tax savings. If it takes too long to make your tax savings then it may not be worth doing.

Hi Richard

That's true, but the new buyer also has to be ok with purchasing the house in the company – though they could always purchase their shares in the company using a discretionary trust.

Does your contract cover these sorts of things?

80% low docs are available at rates lower than many normal loans. 95% Low docs are very high in rates, 9.5ish.

Either way you will be borrowing 100%, with the deposit coming from the LOC, so it won't really help to make a property cashflow positive by putting in more deposit (as this is borrowed too).

If it was me, I would be inclined to stick to 80% LVRs and start off slower.