Hi All,
I have a PPOR, on which i have a separate Loan Account – PPOR LOC. This LOC was used to buy an IP.
Over the years, the IP has increased in value. I have accessed the increased Equity of the IP by setting up a new Loan – IP LOC.
Question
1) Can I use the IP LOC to pay down the PPOR LOC?
2) If so, will there be any tax benefits for doing so?
3) Can I re-direct the IO repayments of IP from the IP LOC? I mean, the increased IP LOC (Separate Loan) be used to service the IP IO repayments?
4) Can the IP LOC (Separate Loan) also be used for all IP expenses (Council Rates, Water Bills, Insurance, etc)
Would appreciate if someone can clarify this.
Many thanks
am2778
Hiya
What's the main reason for doing this?
Does the LOC against the PPOR have a really high rate?
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]
No particular reason. My guess is that freeing up the PPOR LOC with the IP LOC will have 2 benefits:
- Can use the PPOR LOC for another IP pruchase – IP 2.
- Have Cash flows of the IP 1 (rent and Loan Repayments) come out of IP 1 LOC.
No. PPOR LOC does not have a high rate …
Thanks
As Jamie mentioned Yes you can but it it long as it is short.
Can't see any real benefit other than possibly some easier Accounting.
No added tax benefit at all.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi AM
I'm with Richard – I guess you could do it but I can't really see any huge benefit from doing so.
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]
AM2778 wrote:Hi All,I have a PPOR, on which i have a separate Loan Account – PPOR LOC. This LOC was used to buy an IP.
Over the years, the IP has increased in value. I have accessed the increased Equity of the IP by setting up a new Loan – IP LOC.
Question
1) Can I use the IP LOC to pay down the PPOR LOC?
2) If so, will there be any tax benefits for doing so?
3) Can I re-direct the IO repayments of IP from the IP LOC? I mean, the increased IP LOC (Separate Loan) be used to service the IP IO repayments?
4) Can the IP LOC (Separate Loan) also be used for all IP expenses (Council Rates, Water Bills, Insurance, etc)
Would appreciate if someone can clarify this.
Many thanks
am2778
1. Yes
2. No
3. Borrow to pay interest? Possibly, you need to seek advice on this as interest could be denied.
4. Yes.
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
Wouldn't one advantage to this approach be that you would be reducing the 'risk' against the PPOR since the LOC is secured against your home and then 'shift' the liability so to speak to your IP LOC. That way if things turn sour, you may only loose your IP which you may care less about and is just another line in your excel sheet as opposed to your own PPOR home?
Over time I would think that he would build up enough equity in his IP's to never then use the PPOR as security.
Jate,
I could not agree more.
I would like to reduce the LOC secured against the PPOR and continue to use only the LOC secured against the IPs..
The problem that I'm facing is that the there is not enough Equity built up in the IPs to get a LOC and use the funds in the LOC to pay down the PPOR LOC.
Perhaps, its just the market conditions.
Thanks all for your inputs.
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