My current situation
Income: husband. 120K/year (approx)
Wife(me) 0 (could be working part time earning under 30k/year)
1 young child
Current mortgage PPOR market value about 470k
Borrowed 340k, five years ago… Loan balance is 320k at the moment(25 year left), and I did pay LMI when I purchased my PPOR
Cash in redraw ..60k
we are looking to buy something under 300k(including legal fee) for IP
I'm thinking to structure my loan like this
PPOR 320K(change to interest only for 2 years)+ 100k(for IP) interest only(might need to pay some top up LMI)
IP 200K max (interest only)
How does this structure look to you? Please give me some opinion
And also how would you do the share percentages for IP in between husband and wife for maximum tax benefit
All opinion welcome, Thanks, everyone!
Repost it again… Sorry something went wrong
Hi, everyone
We are seriously thinking of doing property investment
I have done some study but never seem to be enough
I wonder if anyone would help me and point out what you would do different if you were me
Thank you
My current situation
Income: husband. 120K/year (approx)
Wife(me) 0 (could be working part time earning under 30k/year)
1 young child
Current mortgage PPOR market value about 470k
Borrowed 340k, five years ago… Loan balance is 320k at the moment(25 year left), and I did pay LMI when I purchased my PPOR
Cash in redraw ..60k
we are looking to buy something under 300k(including legal fee) for IP
I'm thinking to structure my loan like this
PPOR 320K(change to interest only for 2 years)+ 100k(for IP) interest only(might need to pay some top up LMI)
IP 200K max (interest only)
How does this structure look to you? Please give me some opinion
And also how would you do the share percentages for IP in between husband and wife for maximum tax benefit
All opinion welcome, Thanks, everyone!
The structure looks ok – hard to comment on whether it's actually doable based on the limited info above though.
Are you planning on buying more than one IP in the future?
If not, then you don't need to access so much equity for a $300k purchase (unless you need surplus funds for renos or something).
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Get a LOC on the main residence and use that to pay for deposit for the IP. Keep stand alone. All IO loans. Offset on main residence loan.
Consider names on title for the new one.
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
Thanks Jamie
What other factors would i need when considering the structure?
yes, we are hoping to get to 100 property in 3 years…(quote from Steve)
Hi Cham,
A reality check needed here – make your targets realistic. 100 properties in 3 years may have been achievable 10 years ago. Not so sure now.
From memory that property portfolio was what Steve managed to achieve. From memory Steve also had a knowledge and skill set complementary to his property investment journey. Do you have this?
So, focus on number 1, then 2, then 3 and so on.
But in answer to your question about ownership.
If the properties are to be negatively geared they should largely be in the higher income earners name. If the properties are to be positively geared they should largely be in your name.
If you truly believe you can achieve your goal then you should give serious consideration to setting up some form of trust structure so your portfolio is secure from predators. This is an area where specialist advice is required and this advice will probably over-ride my comments about ownership in the previous paragraph.
Thanks, Terry
How much LOC would I be able to take out generally speaking?
if i plan to apply for 100K, would i be be paying LMI even I don't use it?
you are saying by getting LOC on my PPOR ,and leave the IP loan stand alone…
am i right by :
when I spot a property, I use my LOC to put down the deposit
use the pre-approved loan for my IP
and anything that is short, pay with the LOC?
it makes sence…. to me
is that correct?
HI, Derek
Of course you knew I was kidding
hahaha…..
and thank you for the advice for the ownership…. I was actually thinking also need to consider capital gain as well….
Am I too ambitious?
Quote :
If you truly believe you can achieve your goal then you should give serious consideration to setting up some form of trust structure so your portfolio is secure from predators. This is an area where specialist advice is required and this advice will probably over-ride my comments about ownership in the previous paragraph.
I don't really understand this… could u explain if you think I still need to know?
cham_chuan wrote:Thanks, TerryHow much LOC would I be able to take out generally speaking?
if i plan to apply for 100K, would i be be paying LMI even I don't use it?
you are saying by getting LOC on my PPOR ,and leave the IP loan stand alone…
am i right by :
when I spot a property, I use my LOC to put down the deposit
use the pre-approved loan for my IP
and anything that is short, pay with the LOC?
it makes sence…. to me
is that correct?
Ideally get the LOC to 80% LVR of the main residence (less current loan). If this is not enough you may need to go over. LMI will be payable upfront. Properly strucured the LMI could be deductible.
When you find a property place the deposit from the LOC and borrow the remainder as a separate loan. Pay expenses from the LOC too – but not the interest on the third loan.
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
Hi Cham,
Goals are great – but achieving those goals is even better.
Seen too many people with grandiose aims which they fall short of and become crestfallen.
All of my experience tells me to break things into small, achievable steps and then to review them as each target is achieved.
Hi, Derek
great opinion…. breaking things into small… that's what I need to learn
you guys are so helpful…. Thank you
As per what Terry said above.
You don't need to borrow the full $100K against the PPOR. You can juggle the figures around to come up with a better scenario where LMI (if applicable) is lower.
Cheers
Tom
Hi, Tom Thank you for your reply The reason I'm thinking about taking out 100k was in case I see something a bit over 300k My question now is If I take out say 60k against my PPOR and start looking for an IP I find something around 350(including legal) I will then need 70k from my PPOR to avoid paying LMI Is that fair to say if I take out more than I actually need, as long as I don't use it, I will not be paying interest? I had a calculation how much I can take out from my PPOR without touching my redraw I will only be able to loan a line of credit of 56k….. Which mean my IP will need to be under 280…. Do you think it's safer to borrow a 100k?
If you go 80% LVR on the PPOR, then you can always increase the LVR on the investment loan and pay LMI on that (it doesn't have to be limited to 80%).
You mentioned that you paid LMI initially on your PPOR loan, so if you topped up the loan by $100K, it wouldn't be charged on the full amount, but you would need to pay some more. You would need to clarify how much with your current lender. It might be cheaper to go that way, or it might be cheaper to go with a higher LVR on the IP loan instead.
In terms of the LOC loan itself, you are only charged interest on what is drawn down, not the total credit limit.
Cheers
Tom
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