HI,
If I want to use the equity to buy another IP, but I don't want to pay insurance, so I only want to borrow 80% on the new IP. Other money (deposit + stamp duty will be about 25%) from my current property's equity. In this case, can I claim loss against the part on part my current property?
I know some home loan can do that by something like LOC, but my current loan doesn't provide LOC, so do I need to keep a record by my self?
For example, the new IP's value is $300k + $15k other cost. My loan on IP is 240K, so can I claim lost for the interest of $75k from my current loan (resident, not investment).
Or, if I invest my equty to shares, can I dedute interest of this part from my profit (if I have) ?
Also, which bank or lender provider better products for this kind of situation? I am currently with Westpac.
Thanks!
Denny i think you are getting slightly confused on the situation.
You would look to take out a line of credit sitting in behind your current loan (and Yes Westpac offer LOC's) and use this to fund the 20% deposit plus costs.
Then on a standalone basis would secure an interest only on the new investment property.
As both the interest on the LOC and the interest secured against the new IP is for investment purposes the interest would tax deductible. The "purpose test" is applied rather than where the loan is secured.
In turn you could invest some of the funds from the LOC into the share market and the interest would still be deductible.
It could be secured against a motor bike or stamp collection if there was sufficient value in these assets for a lender to lender against them.
Richard Taylor | Australia's leading private lender
Also you don't really need a LOC, you could just have another separate loan for the new portion. make sure it is IO though. ANd, yes Westpac for have one too. If you are borrowing to invest, then the interest should be deductible on this borrowing. It doesn't matter what the security is.
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
Qlds007 wrote:Denny i think you are getting slightly confused on the situation.You would look to take out a line of credit sitting in behind your current loan (and Yes Westpac offer LOC's) and use this to fund the 20% deposit plus costs.
Then on a standalone basis would secure an interest only on the new investment property.
As both the interest on the LOC and the interest secured against the new IP is for investment purposes the interest would tax deductible. The "purpose test" is applied rather than where the loan is secured.
In turn you could invest some of the funds from the LOC into the share market and the interest would still be deductible.
It could be secured against a motor bike or stamp collection if there was sufficient value in these assets for a lender to lender against them.
So the LOC taken out with Lender A is secured by equity in your IP or PPOR to pay the 20% deposit + costs and the 80% is taken as a stand alone loan (Interest only) with lender B(or can it be lender A?) secured against purchased IP.
Will Lender A not require some info on where the money is being spent? I thought banks are being more stringent on the use of LOC's?
Will Lender A not require some info on where the money is being spent? Yes they will and some lenders will say NO.
Thankfully there is still some competition left in the finance market and some lenders still have no issues with "Cash Out".
Your understanding is correct from there on in.
Richard Taylor | Australia's leading private lender
cheers richard. I am I being cheeky by asking which lenders allow "cash out"?
Terryw wrote:Also you don't really need a LOC, you could just have another separate loan for the new portion. make sure it is IO though. ANd, yes Westpac for have one too. If you are borrowing to invest, then the interest should be deductible on this borrowing. It doesn't matter what the security is.Thanks Richard and Terry. I didn't find the LOC or spilt loan on their website. I will go to a branch to find out what is the best sulotion.
It is called the equity access loan
http://westpac.com.au/internet/publish.nsf/Content/PBHLRF+Home+Loans+Fees+and+ChargesTerryw | 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
Terryw wrote:It is called the equity access loan
http://westpac.com.au/internet/publish.nsf/Content/PBHLRF+Home+Loans+Fees+and+ChargesThanks Terryw. If I setup a seperate loan for the invertment, will I pay the interest rate as LOC or the same as home loan?
Currently the home loan is 6.06% and LOC is 6.21%, a 0.15% difference.
No, they are different rates. but you should get a discount on the professional package.
And remember, you may not even need the LOC, but a straight forward loan may do too.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
Wow denny 6.21% is a shocking rate of interest even with the loan amount you currently have.
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Wow denny 6.21% is a shocking rate of interest even with the loan amount you currently have.yes, I know. I meant, before discount.
Is there any broker from Melbourne CBD?
QLDS007 is the man I would recommend you speak to denny! Richard has just assisted me in setting up my LOC through my existing lender. I'm from Geelong but more than happy having my broker parked up in sunny QLD
Thanks Andrew as always appreciate the wrap.
Richard Taylor | Australia's leading private lender
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