Hi Folks
I know we are all tired of talking about LOC, but I would like to clarify an aspect of them …
So let’s say we set up a LOC against our PPOR for say $125k, and we use it for deposits only. We finance the IP’s on independant mortgages.
Now am I correct, we pay interest only on the amount drawn from the LOC. Plus the IP mortgage of course.
Also, is the interest paid on the LOC tax deductablt or (this is were I am really unsure) is it part of my PPOR and not deductable?
One last question, the LOC has our PPOR as collateral (right?), are we taking any ‘big’ risks with our PPOR or is this the safest way to borrow against the PPOR. Appart from setting up a trust.
Cheers
Leigh K[
]Hi,
Now am I correct, we pay interest only on the amount drawn from the LOC. Plus the IP mortgage of course.Some LOC facilities also have an access or facility fee that’s payable regardless of the drawdown.
Also, is the interest paid on the LOC tax deductablt or (this is were I am really unsure) is it part of my PPOR and not deductable?As I outlined in the last newsletter. providedyou apply the LOC funds for investment purposes then the interest should be deductible.
One last question, the LOC has our PPOR as collateral (right?), are we taking any ‘big’ risks with our PPOR or is this the safest way to borrow against the PPOR. Appart from setting up a trust.Higher debt generally means more risk. What’s important is to be sure to invest in an asset that has a cash-on-cash return in excess of the interest rate you are paying on your LOC. This won’t eliminate the risk, but it will reduce it.
Have a great day,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
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