Hello All
I am in a bit of a predicament at the moment. I have searched under "PPOR into IP" and I am still a little confused.
My situation is like this:
My PPOR at the moment in valued approx $470,000
We owe $380,000 on it.
I am currently paying Interest and also paying off the principal amount – $600 per week and interest is approx $1600 per month, so we are effectively putting in $2400 per month and paying $1600 per month on interest.
My LVR is approx 80%
I will be moving to Melb. in about 6 months time from where I live now which is Sydney and will rent out this property. Once there we will rent and then in the future but another PPOR in melbourne.
What would be the best way to stucture my loan?
I will probably get the CBA offset account set up on the loan soon but should I also set up a LOC as well?
The TWIST is that I will get an injection of approx $100,000 into the account soon, which will not be mine and will be used to fund a property for my parents next year, so effectively that $100,000 will probably come out.
I will also probably be putting my name as well as my mums name into the new property that they buy next year with that $100,000.
Can anyone let me know what I should do once i get this $100,000. Should I put in onto the offset account or pay down on my mortgage thus bringing it down to $280,000.
Sorry for the long post.
ANY THOUGHTS PLEASE?
Get a 100% offset account and park the money in there – when you come to utilise this money you will not be redrawing on your loan for a non-investment purpose as it is in a bank account and has not been treated as a repayment of principal.
Simple dont use the CBA as their MISA 100% offset account is not a fully transactional account.
Look to refinance the loan to interest only with 100% offset account and as SNM as mentioned park the money there for the time being. Not doing any harm there and savings you 5.1% or so interest on your home loan.
Flexibility is key when it comes to loans and investing and P & I with a MISA is not flexible.
Richard Taylor | Australia's leading private lender
thanx guys.
what is wrong with the CBA offsett account?
I have basically everything with the CBA. Are you saying change to another loan provider?
Yes all i am saying is the offset account is not fully transactional and with $100K coming into the account you want to maximise your savings and flexibility of the loan.
Some offset accounts are not 100% CBA just happens not to be transactional. Course they never tell you that at the Branch when you get the loan.
Richard Taylor | Australia's leading private lender
i think what you are saying when you say not transactional is that it has a min $500 deposit and withdrawal fee. would this be correct?
you cannot really pay bills and other stuff. Am I right?
Hi double
Yes bang on totally unuseable for most people.
You can do a lot better with the same result and full flexibility.
Richard Taylor | Australia's leading private lender
thanx for that 007, although I do not think that I will change lenders at this stage.
For the moment I probably will get the CBA offset account and park the money in there and then see what happens.
i will probably use my savings still for my transactions anf my loan payments come out of that.
The offset account will purely just store this money while reducing my interest on the home loan.
maybe in future when I access the equity in the IP to buy my PPOR in melbourne I may switch to another lender.
does this sound reasonable? or do you think that I should leave the CBA now?
thanx.
also i understand that if i do change to an IO loan, I cannot pay more than 10,000 a year off the loan. but if i put the money in the offsett account this will not affect this.
I am still thinking of paying more off the home loan untill i get the $100,000 as this way my total owe is less and my unit may even be cashflow + when i go to rent it out.
surely this would be a better outcome than negatively gearing it.
Hey doublek. Im pretty sure you cant run an offset against an IO loan though – only an I+P.
Sorry to high-jack – but what did Scottnomates mean when he said offset is better than redraw? Im currently using my redraw (no fees for in or out) as a dumping ground for all my spare cash, including my wedding funds. Ill of course have to pull the wedding funds out in a few months, but it is helping towards reducing my loan. I went this way rather than an offset as the interest rate is lower. What exactly is the benefit from drawing from an offset rather than a redraw?
thanks
Ktastrophe, I'm with CBA and you can have an offset against IO Loan. It's only when you have a fix rate loan that you will not be able to get 100% offset for the loan (I think it's only 1.5% or something stupid like that).
Also Doublek, I had the same situation recently and the CBA offset worked well for me, as I kept paying normal repayments (P+I) and dumped the extra funds in the offset until it was needed, this reduced the interest on my loan significantly for those few months.
Cheers
If I was you I would immediately change to an interest only loan. 100% offset would be good, but not essential as you will be buying a new PPOR and should have the offset against this loan to save non deductible interest.
Terryw | 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
thanx guys. IO will be coming in a few weeks time.
also i have the wealth package with the CBA. naybe this may make a bit of a difference.
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