All Topics / Help Needed! / IO on IP while still carrying PPOR mortgage?

Viewing 10 posts - 1 through 10 (of 10 total)
  • Profile photo of bigmamabigmama
    Participant
    @bigmama
    Join Date: 2012
    Post Count: 7

    Hi People

    Just starting out with my first IP & am keen to get your advice on how to best manage it while still carrying a mortgage on my PPOR.

    Am I best to go IO on the IP & concentrate on paying any extra funds off my PPOR, rather than add a larger amount to top up IP by paying P & I loan? I will still need to top up IP even at IO but not to the extent as P & I.

    I asked this of my lending officer but she wasn’t keen on IO for some reason but from what I can gather from these forums she might not be giving me good advice????

    Any help would be appreciated!

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Definitely.

    If you start paying PI that means you are diverting funds from your home loan (what you could have been using to pay of your home loan). Remember home loans are private expenses so the interest will not be deductible like an investment loan

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

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of BMWBMW
    Participant
    @bmw
    Join Date: 2012
    Post Count: 25
    bigmama wrote:
    I asked this of my lending officer but she wasn't keen on IO for some reason but from what I can gather from these forums she might not be giving me good advice???? !

    Never take the banks advise as to being in your interest, they look after their own not yours.
    IO on the IP is a no brainer whilst you have non deductible debt

    Profile photo of PLCPLC
    Participant
    @plc
    Join Date: 2012
    Post Count: 400

    As per the two posts above, the goal should always be to pay your PPOR debt down rather than an IP debt.

    It could be taken one step further if you are thinking at converting your current PPOR into an IP down the track to even change that to an IO loan with 100% offset.

    PLC | Phoenix Loan Consulting
    Email Me | Phone Me

    Melbourne based Mortgage Broker | Making Finance Simple

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Bigmama

    I like keeping all loans as IO with an offset against the PPOR.

    This provides maximum flexiblity – for both longer term taxation implications (if you ever decide to turn the PPOR into an IP) and gives you more control over cashflow.

    If you're not disciplined with money and think you'd only make the minimal interest repayments on the PPOR loan than I'd keep it as P&I.

    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 bigmamabigmama
    Participant
    @bigmama
    Join Date: 2012
    Post Count: 7

    Thanks for your input people. You have confirmed what I’d already thought, will now structure the loan for the IP as IO & continue to reduce my personal debt first.

    A big thank you from a very appreciative first time investor.

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

    Hi Bigmama

    Taking it further from what has already been stated remember all you want to do is set up a sub loan secured against your PPOR equivalent to 20% of the anticipated new investment property purchase price + sufficient to cover the acqusition costs and then on a standalone basis (usually with a separate lender) you want to secure the 80% balance.

    Most lenders will want to try and encourage you to cross collateralise your securities and wont understand why you want to go elsewhere for the new loan but then of course they are looking after their interest and not yours.

    Your Mortgage Broker should be able to advise you further in this respect.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of BMWBMW
    Participant
    @bmw
    Join Date: 2012
    Post Count: 25

    If its your first property, its definately worth talking to a broker.  Don't fall into the cross collateralisation trap as Richard mentions above.
    been there done that, it's a nightmare to when it comes to number 2.

    Profile photo of bigmamabigmama
    Participant
    @bigmama
    Join Date: 2012
    Post Count: 7

    Thanks for all your comments, IP has been set up as per your recommendations. I really appreciate your advise & hope this will be the first of many!

    Cheers
    Cathy

    Profile photo of bigmamabigmama
    Participant
    @bigmama
    Join Date: 2012
    Post Count: 7

    Thanks for all your comments, IP has been set up as per your recommendations. I really appreciate your advise & hope this will be the first of many!

    Cheers
    Cathy

Viewing 10 posts - 1 through 10 (of 10 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.