I am planning to buy 2nd investment property in the new year 2012 around Feb/March.
How would i finance the 2nd investment property and which property should I use as security my house or 1st Investment property
Combined income gross – $ 190,000/yr
Current Mortgage Owe – $300k
Valuation came at – $485k
1st Investment Property Owe $568k (Brand new townhouse, Interest only and tenanted at $480/wk)
Just bought this property about 2 weeks ago.
Was originally selling at $650k but I bought it at $517k + Stampduty and LMI =$568k (Borrow 100%)
Value estimated at $600k-650k around Feb/March Next year 2012. Lets just say for now that it will be worth $600k in Feb/March.
Based on the above figures, I would like to know how I would finance my 2nd investment property and which property to use as security?
I am just going to put it out there and wait for some answers/ideas/strategies/finance options from bank or broker etc…..Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
It looks like you've crossed your PPOR with IP1.
I'd look to tidy up that structure first before moving onto the next one.
Yes, I agree with Jamie. Fix it now before getting more tangled. Or fix it at the time you go for the new loan.
Agree with the boys comments above.
As it stands you wont have a choice of what property you use as security as the loans are crossed all properties will be used.
Not a great way to go forward.
Yours in Finance
Interestingly the same day I posted this post i was considering 90% or even 95% cause I didnt want to use my PPOR as security, I call my mobile lender to work out on some figures/options that I had. Settlement is still 3 weeks away. I have already put down my 10% deposit ($51700) and decided to go 95% and not use PPOR as security.
New loans will be:
Current Hm Loan has been increased to 377k
Investment Loan will be around $502k after settlement. (Estimated value range is ($600-650k))
So this is now resolved. now I can focused on No.2 in the coming year.
Now till Feb next year I can save about $20-25k to put on my current mortgage.
Looks like I can now go 100% and use the 1st IP as security to buy No.2. But I dont think I have enough equity in No.1 IP to buy No.2 IP
Anyway just would like to know how I could proceed on financing the 2nd IP?
Sorry New2Invest why in the world would you pay a Cash deposit when you have a PPOR loan.
By doing this you have now lost the interest deduction on the 10% deposit and also have contaminated the interest deductibility
by just increasing the PPOR loan. I hope you have set up a split loan instead.
Yours in FinanceNaniParticipant@naniJoin Date: 2003Post Count: 38
We have also done similar thing to New2Invest. We had to redraw from our offset a/ct to put in 20% deposit for an IP, because the bank is only willing to loan us 80% or we'll be subject to mortgage insurance.
Sounds like we've done a big No No as well?gettinitMember@gettinitJoin Date: 2011Post Count: 9
i am so confused I have a current PPOR with $123000 left on mortgage house will be worth about 200,000 investment property is around 300,000 what is the best solution?
Pay the 10%deposit from what i have paid off mortgage on PPOR as I doubt I will be able to get 100%.
My plan is to let the investment property pay itself off (interest only) while still paying principal and interest on my PPOR is this the right strategy?
Your situation certainly needs careful handling as redrawing the deposit on your PPOR will mean you will contaminate the interest.
On the basis you will be staying in your PPOR for a while i would get your Mortgage Broker to split the loans in order to maximise the deductions.
Yours iin FinancemiikeParticipant@miikeJoin Date: 2008Post Count: 111
I’m no expert in this area, however considering the sounds of your strategy is buy, hold, lease, wouldn’t the following be applicable:
As an example:
PPOR (Valued at 450k):
Loan 1 (IO) – 300k
Offset Account attached to Loan 1 (All Savings) – 20k
Loan 2 (IO) – Equity from Loan 1 (based on 80% LVI) – 60k
IP1 (Valued at 400k):
Deposit/Closing Costs – Obtained from Loan 2 – 40k
Loan 3 (IO) – (based on 95% LVI) – 380k
IP2: (Valued at 350k):
Deposit/Closing Costs – Obtained from a new equity loan on IP1, or Loan 2 (if no equity in IP1) – 40k
Loan 4 (IO) – (based on 95% LVI) – 333k
Due to having IO loans and using the equity for first IP purchase, the PPOR is not crossed, thus no interest contamination.
The IP Loans are seperated from the PPOR.
Can anyone comment please.
I heard from people at work
According to the ATO, if you can provide proof of any cost you incur towards your investment property, should be fine to claim.
In otherwords i should be able to claim 100% even if I have deposited 10% (redraw from PPOR) and bank lend me 90%
Investment loan + deposit = 100% clamaible for as long as you can provide proof.
Is this true? can you do that?new2invest wrote:I heard from people at work According to the ATO, if you can provide proof of any cost you incur towards your investment property, should be fine to claim. In otherwords i should be able to claim 100% even if I have deposited 10% (redraw from PPOR) and bank lend me 90% Investment loan + deposit = 100% clamaible for as long as you can provide proof. Is this true? can you do that?
This is not really so. The full interest on 100% of purchase price won't be claimable because the 10% came from the offset account which is savings. If the 10% was taken from the offset and put into the loan and then reborrowed then the 100% of the interest would be claimable – but this would also contaminate the loan so a better way would be to make a new split on the existing loan and borrow the 10% from that.
As Terry has clearly explained your assumption is incorrect.
Maybe people at work are not the best for obtaining Tax advice from.
Yours in Finance
Thank You all.
Loan has now been Split.
Got depreciation report done as well and came at 14700.
Loan structured to claim 100%.
Tax Variation form 2011-2012 all completed waiting to be lodged after settlement.Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069new2invest wrote:Thank You all. Loan has now been Split. Got depreciation report done as well and came at 14700. Loan structured to claim 100%. Tax Variation form 2011-2012 all completed waiting to be lodged after settlement.
It's great to hear it all worked out for you.
All the best in the future.