Yes I am new to this site.
My main question is how to best structure my mortgages/investment loans so I can get a better return. Being new to Australia I went to a finance broker who whilst was good we did not really discuss the structure of the mortgages/investment loans as we went on. We just got them. My portfolio is worth about $1.5m and I have approximately $700k in equity with loans to the value of $782k. 2 of the loans are for investment properties ($175k loan valued at $380k making a slight loss, rent $240 per week; $310k loan valued at $500k negatively geared (strata management fees doubled 12 months after we bought it and rents flattended out), rent $320 per week. The latter we have tried to sell but did not even get to auction although have always been able to rent out. The home mortgage is $296k valued at $650k. The investment loans are interest only and also are at a reduced rate to the home mortgage.
But now I need help as the second investment property is costing me money and I can’t sell at this moment. It is a new apartment so I am limited as to how I can improve on it. I do want to find the next positively geared property but at the same time this may be a good opportunity to see how better to structure things.
Can anyone help?[fear]
Wendy Jones
Hi Wendy,
Take a look at:
http://www.mortgagepackaging.com.au/index_files/professional_pack.htm
Can you tell me if you have a similar structure for your owner occupied home? If not, I think that structure is invaluable.
Regarding your investment loans being cheaper than your home mortgage, I would remedy this situation immediately. Your investment loans are deductible and your home mortgage is not. You want to be paying as little as you can on your home mortgage because the interest is an expense that can not be recovered.
Your position sounds excellent as you are only geared at 52.77%. You should be able to secure any loans you like unless there are other adverse factors or serviceability issues. Your interest rate should also be no more than an advertised rate of 6.37%. Introductory rates would be cheaper still for one year.
Hope this helps.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Hi Wendy,
Without knowing the specifics of your current structure it is difficult to provide clear cut advice.
Each of the properties is sufficiently valued to be stand alone loans. For me this is the first thing that I would investigate if I were you and if the loans are cross-collateralised then take steps to make them stand alone.
Once this is completed you have sufficient equity remaining to create lines of credit of 129K, 90K and 324K (@80% LVR) enabling you to then leverage off these dollars into other investments. Your income may be a limiting factor here – a discussion with a reputable broker will see what your options are.
As an aside I wouldn’t be overly worried by the ‘loss’ on the second IP as the growth has realised approximately $190K in the time you have owned it. The ‘loss’ can be offset with other income producing assets as at the end of the day you do require assets and income to service future investments.
But ultimately – your goals, exit strategy, home factors etc all come into play and will determined what the best options for you are.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping.
No offence Derek, but I certainly would not be advising the use of Line Of Credit facilities. It is unnecessary. I would recommend interest only invest loans split as needed and an offset account attached to the home loan.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Really there is not much to it. Do PI on your home loan or maybe IO with 100% offset, and IO loans on all investments. Pay as much as you can off your home loan and as little as you can for your investments. Any investment expenses such as rates etc could then be borrowed (LOC or redraw) and the cash you would have used to pay these could then be put into your home loan.
Paying all bills etc with a credit card can help by getting you points and can save you interest by leaving your cash in your offset longer.
Terryw
Discover Home Loans
Mortgage Broker
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Wendy & welcome to the forum,
It is a good idea to have your long term goals in mind when structuring finance, as Derek suggested your exit strategy should also be considered,
A good structure will not restrict you to the one particular lender, but allow you the freedom to finance each investment/purchase with the lender of your choice and avoid cross collaterisation over your portfolio,Insuring personal and investment debt is kept separate is also paramount, this can be achieved via a split loan, I would also suggest you consider the benefits of attaching a 100% offset to this portion of the non deductible split loan, Good luck.
Regards
Steven
Mortgage Broker
Mobile Mortgage Market[email protected]
http://www.mobilemortgagemarket.com.au
Ph:0402483216
Ph:1800 820 500
VICTORIAPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Thanks for your help. To cover a couple of the responses:-
All my mortgages/investment loans are all stand alone with the same lender. I have never used as yet collatoral to buy.
The owner occupied home is PI and the investment properties are interest only.
I suppose what I was trying to establish is if it is possible for me to move some of the debt from my home loan over to the investment loans. That way I pay less as a total sum on repayments and can claim more against taxation which would help recover some of the costs incurred with the negative geared property. e.g. decrease borrowings on home loan by $100k and increase on investment loans by $50k for each loan.
How would the tax office view this, is it possible and would it incur high admin charges from the bank?
Regards
WendyWendy Jones
Hi Wendy
I don’t think that the ATO would look upon that too kindly. Can’t say for sure…BUT, didn’t they recently crack down on that type of strategy with split-loans?? I.e. Paying off all of your home loan debt first, and then paying off all of your investment debt later. What you are proposing seems fairly analagous to that.
You can’t do that. It is not how the money is secured that makes it deductible, it is the purpose of the funds. In your example, the purpose is to pay down your owner occupied home and therefore it is not deductible.
If you had the investment property in different names though, you could do some amazing things with loans, etc.
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
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