TMA,
Thanks for all your help.
I asked this question before but it didn’t get answered so I’ll ask it again….
Is un-cross collaterising two loans/properties hard to do??? Because my mortgage broker did not present it to me as an option.
Any idea whether Bankwest will lend more than 80% (with LMI being paid)??
p.s. why do you hate Bankwest?
Uncrossing properties is easy to do if each one stands up on its own. In your situation, this is not the case. One of your properties would be over 100% and the other much less. Even if you spread the debt, they would still be over 80% LVR.
BankWest do lend more than 80% LVR with LMI but you can always go elsewhere if they will not help you. You can easily spread the debt and keep deductible and non-deductible debt separated using splits. This would uncross your properties.
Personally, I would put 80% LVR on the lowest valued and/or slowest growing property and take the other property to 90% or 95% to help buy the next property and do whatever renovations you want. Also, put 80% on the new property (or 90-95% only if you need it). This would minimise the LMI payable across all loans as each property is dealt with separately.
As for why I hate BankWest, my most recent experience with them was disastrous. Their service was very slow and extremely poor. Their lack of communication and incompetence cost me money and stress from my clients (who were existing clients of BankWest). They were impossible to contact and rarely returned contact even when the matter was escalated. It was only when I threatened to sue them that things were finalised within a week. I threatened to sue them as I told them the clients threatened to sue me and the delay was as a result of actions way beyond my control and way outside their SLAs (service level agreements).
Having said that about BankWest, I hear many brokers speak highly of them. This was possibly just one of those problem loans that happens every now and then with any lender but it was the only time I used them. I have never considered their products to be the best so have not needed them and only used them this time for a loan increase because the clients had fixed loans and cross-collateralised properties tied up with them and did not want to pay break costs to go elsewhere.
Things can go sour with any lender for any number of reasons. I just did not agree with the way they dealt with the issues we faced.
TMA
http://www.email4money.info
Investor Links
First Home Buyer WebsiteTMA,
Here’s a scenario for you, do you’d think it’d work??
Keep in mind:
~Current IP loan amount $185,000 value $285,000
~Current PPOR loan $225,000 value $215,000
~New IP purchase price $64,000What if I took current IP loan up to 80%. Currently it’s at 64%. This would free up $63,000 in equity.
With this $63,000….
– make current PPOR loan 80% by chucking $45,000 in there
– make new IP loan 80% by using a 20% or $12,800 depositThen I’d have $5,200 left over.
Once all the loans are setup, settled, etc etc we could redraw on any of the two IP loans and use that money for new IP renovation and PPOR renovations.
Hmmmmmmmmmmm, sounds too good to be true! I must be missing something?? [blush2]
You sort of have it right.
I would do the following all at once…
PPOR – 80% LVR
Loan 1: $172,000 (Non-Deductible)
Interest Only Loan with Offset AccountIP 1 – 90% LVR
Loan 2: $53,000 (Non-Deductible)
Interest Only Loan
Loan 3: $203,500
Interest Only LoanIP 2 – 90% LVR
Loan 4: $57,600
Interest Only LoanOnce all loans are covered and the new purchase price is paid, you should have $18,500 left over. Out of this money, you need to pay the LMI, loan application fees and charges, closing costs on the new purchase, etc. There will not be much change for renovations but you get your second investment property.
Once everything is setup, there will no be much to redraw. It should all be sitting in Loan 3 and this money should ONLY BE USED FOR deductible expenses.
All income from work, rental income and any other income should be directly deposited into Loan 1’s offset account. Direct debits should be set up to make all the interest only payments on all your loans. Do not draw funds from the offset account for deductible expenses. Wait until you can increase Loan 3 or 4 for these expenses.
Do not mix up deductible and non-deductible debt!
Any half-decent broker can get this sorted for you assuming your serviceability will not pose a problem.
TMA
http://www.email4money.info
Investor Links
First Home Buyer Websitemaybe a question for TMA, can you use the investment property they are purchasing as security. I’m only new to this, but i’ve bought one IP, and its my only property, but i used this as security.
cheers, Jarred.Hi TMA
Why isn’t loan 2 non- deductible as its on an IP?
IP 1 – 90% LVR
Loan 2: $53,000 (Non-Deductible)
Interest Only Loan
Loan 3: $203,500
Interest Only LoanHI C2,
Let me try to answer this one.
Loan 2 is non-tax deductible because it is used to pay down PROP.Difficult, butthe only advise I can suggestis to try another broker who is more desperate for a finance deal and he or she will be more likely to pull it through.
Roy H.
L.R.E.A., Dip FS (FP)
Guardian Property Specialists (GPS)
http://www.gpsnetwork.com.auHi pasandbec,
Is your IP1 used to be your PPOR? If it was the case, can you sell it and still avoid paying CGT? May be that is an option you could consider by selling off IP1 and with the proceeds to pay down non deductible loan on PPOR and buy this IP2.There is nothing complicated about this, & there is no need to sell,
1. The properties are cross colaterised.
2. Pasandbec require funds from equity to fund deposit on IP2Solution:
As already mentioned, refinance to a higher LVR, uncross properties, use split loans to keep deductible & non deductible debt separate, Its not rocket science.If your Broker still doesn’t get it, print out Rob’s last post and get your Broker to join the dots.
Regards
Steven Crane
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Thanks,
High Flyer.Hi guys,
Thanks for all the replies/suggestions/help.
We have decided to let this one go for now and concentrate on renovating our PPOR instead. Then once that’s done we’ll look at getting a 2nd IP. Hopefully our property will have gained in value and it will be alot easier to obtain finance.High flyer – our current IP (yes, it used to be my PPOR) IS actually for sale. Won’t pay any CGT (if it sells soon), in fact will make a loss, because it was at it’s peak value at the time I started renting it out. So that’s good, and even better that I can use this capital loss to offset any future capital gain [biggrin]
It is sad news that we have to let this one go but I believe most things happen for a reason and it was probably not ‘meant to be’.
It has taken a bit of pressure of me at least, although boyfriend is still quite dissapointed. I feel like I already have enough on my plate at this time, trying to find a new job and undergoing major renovations on PPOR.
Our guides are probably trying to tell us to “slow down” heheh
thanks again,
pasandbecour current IP (yes, it used to be my PPOR) IS actually for sale. Won’t pay any CGT (if it sells soon), in fact will make a loss, because it was at it’s peak value at the time I started renting it out. So that’s good, and even better that I can use this capital loss to offset any future capital gainErr, wha..?
You’re going to claim a capital loss based on the percieved / approximated / appraised loss of value since you moved out and started recieving rental income?[blink]Well, this tactic sure is a new take on ‘timing the market’… only I think you’ll find the ATO less than impressed by it.
Cheers, F.[cowboy2]
well, that is what I learnt off this board, with Monolopy’s ( I think?) help.
pasandbec
Well, I think your ‘aha!’ moment for today should involve the lesson Don’t believe everything you read on the internet![biggrin]
Cheers, F.[cowboy2]
Well, instead of just saying it can’t be done (or, sorry, that the ATO would be less than impressed by it), maybe you could tell me why? [biggrin]
I am new to all this and very eager to learn.
pasandbec
Hi pasandbec,
I think the confusion is here. You can’t claim “capital loss based on the percieved / approximated / appraised”- this is true.
However, a capital loss can be offset against future capital gains. E.g. If you sold a house/shares and lost money, then sold and made a profit, then minus the capital loss from the capital gains before figuring out the tax rate. I’m sure that you can only carry a capital loss for only so long… a year? something like that.
Hope this clears the air!
On a capitol loss it stays as a carried forward on your tax return until offset against a gain.
hrm
Really? Forever? That’s great. Dunno where I got that from.
Thanks
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