All Topics / General Property / Release Equit on PPOR turn IP?

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  • Profile photo of kenzelkenzel
    Member
    @kenzel
    Join Date: 2007
    Post Count: 51

    Hi,

    Just wondering whether it would be possible to borrow against equity built up in an IP (that was previously an PPOR).

    Is that allowed once it becomes an IP? Also when borrowing aginst the equity, will that mean the principal of the property gets reduced assuming the loan is P&I? i.e. more interest repayments Any feedback most welcome and appreciated :)

    Thanks,

    Kenzel

    Profile photo of Event HorizonEvent Horizon
    Member
    @event-horizon
    Join Date: 2008
    Post Count: 90

    kenzel,

    yes you can borrow again the equity regardless, not clear on what you mean when you say

    "Also when borrowing aginst the equity, will that mean the principal of the property gets reduced assuming the loan is P&I? i.e. more interest repayments"

    are you  topping up the existing  loan perhaps? Cant figure it out??

    Profile photo of kenzelkenzel
    Member
    @kenzel
    Join Date: 2007
    Post Count: 51

    Event Horizon – pls consider the following example

    Total House Value – $300K
    Total Loan Remaining – $170K
    Total Equity – $120K

    If I were to borrow against the full equity amount (i.e. 120K) will the new figures be –

    Total House Value – $300K
    Total Loan Remaining – $300K
    Total Equity – $0K

    Sorry should've explained with an example at the start

    Thanks

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Kenzel

    Assuming you could find a lender to agree to allow a 100% refinance then Yes you could go upto $300K and draw out the available equity.

    In saying this remember that the interest charged on the loan would not be tax deductible unless the funds drawn down where used to generate an income or for investment.

    You would want to make sure that the loan was structured correctly to maximise your tax deductions and reduce the interest charged on any non deductible portion.

    Richard Taylor | Australia's leading private lender

    Profile photo of Event HorizonEvent Horizon
    Member
    @event-horizon
    Join Date: 2008
    Post Count: 90

    kenzel,

    ok i get it!!

    Your equity on the existing remains the same as it currently is. The equity on the new purchase will depend on how you intend to finance it and how much of all costs you plan on borrowing.

    Remember your lender may only lend you 80% of your LVR and if you get a loan for more you need to factor in mortgage insurance plus all the usual buying costs..

    Profile photo of Event HorizonEvent Horizon
    Member
    @event-horizon
    Join Date: 2008
    Post Count: 90

    kenzel

    just to add,

    that means your new equity will obviously be the total value  of the 2 properties combined  minus the loans against them.

Viewing 6 posts - 1 through 6 (of 6 total)

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