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you could sell and buy a new IP,
or I've heard that you may be able to buy or sell your half to a joint owner and increase the deductible amountThanks Richard,
are you saying it would be better to set up a separate loan for the 20% deposit secured against the PPoR rather than refinance the PPoR to a line of credit with a split option (separating the interest costs from th home and the IP)?
In the example used in the API article, the investor has a PPoR worth 400k and owes 150K. the investor sets up what they call a MF, Master Facility to borrow up to 80% value of the PPoR. 170k (MF) + 150k (owing on home) = 320k = 80% of the home value.
This Master Facility in then used to fund the deposit and settling costs (stamp duty etc) for two IPs costing 300k each.
10% deposit from MF
80% loan for IP
10% from MF
costs also from MFIP1 costs 300k funds from MF 20% = 60k + 15k settling costs = 75k
IP1 costs 300k funds from MF 20% = 60k + 15k settling costs = 75k total from MF 150k
MF is now drawn to near the limit of 170k.
I ordered the issue and read the article today. Most of the important info that is in the article has been covered in this thread. It got me thinking about how I would get in the best position to remove cross security with our loans.
The bank conveniently for them valued our home which is being constructed at the purchase price of the land + the build cost ($114000 + 155000) $269000. homes in the already developed part of the estate that are the same size have been on the market for 400k+. Note this was the purchase price of the land in Nov 2007. we also have 50k as backup money and to use to complete the house (driveways landscaping floor coverings) etc. once our house is complete and our construction loan is fully drawn we will owe 200k and I expect it will be worth around that 400k mark. we bought our IP for 245k with 2k deposit and borrowed 265k roughly 11k closing costs and just under 11k left over to go towards sub division costs. I think that once the IP is sub divided the conservative vale of the property will be about 225k for the portion with the house and 110k for the vacant land
the examples given in the API article show how to structure loans before you purchase an IP . My question is how do I structure things to remove our home as security? The loans are with the CBA they are both 3yr economiser (variable) currently 4.96%. I'm thinking I need to wait till our home is complete, then refinance to a line of credit and use it to put down a deposit (20%) and refinance the IP with a different lender (80%). Have I got the right idea? Are there any other options?
break costs would be the main point of interest.
Friends of mine are considering this loan, I couldn't see any terms and conditions on their website. has anyone looked into it further?
just looked on the API site, was un aware that back in the day they used to spread an issue across 2 months
Hey Carlin, which is it?
The 2004 Feb or March (or both) issue of API?Cheers
Ben
excellent! I will try to get my hands on it. I'm confident that we will be able to refinance or swap to a line of credit when our home is complete, plus the IP is sub dividable, so there will be instant equity when that is done.
cheers Carlin, I may be confusing it with articles about using borrowed funds to service loan repayments.
I wish that I found this forum two months ago.. We purchased our first IP cross collateralize with our PPoR, which is under construction. I was under the impression that it was the only way we could do it without outlaying a big deposit. A little naive I guess, but you live and learn. I'll set about sorting it out.
Cattleya wrote:Hi Carlin,I was able to show my accountant that 100% of Citibank loan went into the mortgage as suppose to paying lawyers fees, stamp duty etc. He let me have it as a deduction. He says it doesn't matter what loan you have, as long as the purpose is for investing. If you are "stupid" enough to invest with the more expensive loan…
The catch is, you must not tell the bank or they won't let you, they'll insist on LMI. It is also about timing:
For mortgage pre-approval, bank doesn't need proof of 20% money sitting in your acct for 3 months
The 3 months proof is only required when you already have the property and about to sign the contract.So I took the citibank loans when I was still looking. The money was sitting in my saving acct whilst I continued looking for the property. Lucky I found it a few weeks after citibank loans and arrange for contract day to be a few weeks after the 3months citibank date… just to be safe.
Because my savings acct was with Westpac, the lender looked into my acct himself and was happy to sign off the final mortgage approval.
So the key is timing and planning… good luck!
PS: I hate mortgage insurance because it is for the bank's benefit, not me.
Purchase price is $950k. If I go bankrupt, the bank sells my house.. say for $890k. The remaining $60k they claim from the insurance company while I get nothing.So it benefits them, not me. Honestly, why cough up $23,000 of your hard earned money just to safe their b***??!
sorry to drag up an old post, but would the interest on the personal loan be deductible if the loan drawn down and transferred into a savings account inter mingled with private funds? it was my impression that it wouldn't be after reading various articles in API
