All Topics / Help Needed! / Purchase as PPOR, change to IP loan structure

Viewing 7 posts - 1 through 7 (of 7 total)
  • Profile photo of mellowtoolmellowtool
    Member
    @mellowtool
    Join Date: 2012
    Post Count: 2
    April 17, 2012 - 7:22 am

    Hi everyone

    I am new here so please bear with me as I relay my slightly long winded story. I will soon come in to 300k inheritance and have some questions regarding how to best structure a loan, or even if lenders will lend to me at all.

    My idea was to purchase a home in an established area in Perth using the 300k as deposit and borrow up to 250k on top of that. I work in a regional centre in WA and have extremely cheap rent as part of my employment conditions. We have no savings or savings history as we spent it all while Mum was sick. I am earning 55k working part time and my partner earns 25k working part time. We have an 18 month old daughter and are expecting a sibling for her in November :) I have 14 weeks paid maternity leave from my employer as well as 20 weeks long service leave and 4 weeks annual leave owing to me.

    Can I buy the house in Perth, move into it for six months whilst on leave but full (albeit part time) wage, claim the CGT exemption and FHOG and SD reduction, then return home and later to work while renting the Perth house out as an IP? Is this a sensible approach? Will any lenders lend to me on this basis? What is the best way to structure a loan in this case – would IO work?

    Thanks in advance for your advice

    M

    Profile photo of Aaron_CAaron_C
    Participant
    @aaron_c
    Join Date: 2012
    Post Count: 65
    April 17, 2012 - 7:50 am

    Hi mellowtool – it’s hard to answer your question without more details. Have you consulted a broker/bank to see how much you can borrow?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    April 17, 2012 - 10:38 am

    Before you go any further you should get some good legal advice as there could be asset protection and tax strategies you could utilise.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    April 17, 2012 - 11:20 am

    Hi M

    Welcome to the forum.

    Your questions are very broad and are difficult to answer based on the limited info.

    As a starting point, you need to work out what you're able to borrow and what you can reasonably afford to repay.

    If this property is going to turn into an investment down the track, I'd be hesitant to use your entire $300k savings as a deposit – because this debt will become tax deductible in the future.

    By purchasing it as an owner occupied home, you should be able to claim the FHOG, etc providing that your satisfy the FHOG conditions. Just because you purchase it as an owner occupied home, doesn't mean it will be CGT exempt in the future.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    April 18, 2012 - 6:44 am

    There is no reason why you couldnt borrow 100% of the purchase price and offer your cash savings as collateral security.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of mellowtoolmellowtool
    Member
    @mellowtool
    Join Date: 2012
    Post Count: 2
    April 27, 2012 - 2:33 am

    Thanks for your comments. To respond:

    I have been to banks to see how much they will lend and that I can comfortably afford. This is how I have come up with these figures. If I don't use the 300K as deposit I will not be able to borrow enough as we do not earn a lot at the moment.

    I was under the impression that I would be able to borrow against the equity in the house to purchase an IP at a later date, thereby gaining tax deuctible debt at that time when I am in a better position to service it?

    I will seek some legal advice, thanks Terryw. I have already sought tax advice, so I was under the impression that as long as you live in a property for 6 months every six years you can claim that property as your PPOR and that it would therefore be CGT exempt if you were to sell it in that time?

    The main question that I was concerned about was if you guys thought it was likely that the banks would lend to me on the basis of being on paid leave (I haven't discussed that with them yet) and then renting the property out after the six months? And if they would give an interest only loan for a property that is initially a PPOR?

    Thanks for your help

    M

    Profile photo of mattstamattsta
    Participant
    @mattsta
    Join Date: 2011
    Post Count: 604
    April 30, 2012 - 12:59 am

    while you have gone to banks – it may be useful to go to a mortgage broker as they have good relationships with banks and other lenders, many of which you may not have contacted yet.

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