I find myself in need of some advice, and haven’t got the time I usually have to learn from previous posts.
My wife and I left our PPOR to travel Australia 2 yrs ago, and have now made the decision to not return but to buy another PPOR and continue to class our first home as an IP.
The IP is currently valued at $260,000
We owe $106,000 ($32,000 ahead on repayments – unfortunately not in the offset acc but on the loan itself)
We have another separate loan of $8,500 that was structured as a home loan as the funds were for extensions/renos.We are under contract for a PPOR, purchase price of $280,000
We would like $305,000 to fund the PPOR (purchase price,legals,renos)
We have $10,000 cash on hand with another $4,000 – $7,000 to be saved before Settlement/loan draw down.
The bank will lend us a max of $283,000 without the need of recalculating/restructuring the IP loan.
If we were able to access some of the equity to buy the PPOR it would make things so much easier as we had earmarked the cash on hand for other purposes.
My questions are:
Should we make every effort available to not touch the IP loan?
What are our options?
Could we increase the loan amount of the $8,500 “home loan” to buy the PPOR? (thus negating the need to establish another loan for PPOR.)
What happens if we redraw the $32,000 to fund the PPOR?
Thanks for your time. I’ve learnt many things from this forum and do look forward to your advice and learning more.
Jeffrey
If you redraw the $32K from your IP you are contaminating the loan. ie it will be mixed with both deductible and non deductible (the $32K) money.
Do not do that.
I’m a bit confused about the $8,500 loan. I would increase that if possible (as I assume it’s tied to the IP) but it will be separate and not confuse the deductible and non deductible debt.
Change the IP to interest and if the IP is CF+ direct the rent to your non deductible loans. Or you could even compound the interest on the IP loan to pay down the PPOR debt faster.
Hi eyelove,
If we were able to access some of the equity to buy the PPOR it would make things so much easier as we had earmarked the cash on hand for other purposes.
As long as you don’t “contaminate” any current loans on the IP that are deductible, then go for it. Go for a totally new loan against the IP – the new loan will be non-deductible, but ensure it is a new and SEPARATE loan and not a current loan increased (as Catalyst warned). Set the Offset up against that new one, and you are on your way.
That is the ideal one for an Offset, and rents, etc should go into that one.
Benny
PS the usual – you know “This is not advice, just my opinion”…. ;)
You have a LVR of less than 50%. So just set up a new split secured on the old PPOR and use this for the shortfall of the new PPOR – make sure you don’t incur any LMI as there should be no need for it and it won’t be deductible. Also note that the interest on this new split won’t be deductible because the money is being used to fund the new PPOR>
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 eyelove,
You should be able to access equity in existing property – as others have said, just set it up as a split loan to separate deductible and non deductible debt.
By the sounds of it you’re having serviceability issues (borrow cap). You could go to two separate lenders for the equity release of your existing property and your new property. By doing so, you may be able to increase your borrowing power and get over the hurdle.
If you’re going to the same bank and they’re only offering your 283k, its unlikely they’ll give you any more from your existing property.
By splitting the two lenders, you can benefit by going to a more generous lender who is willing to offer you the cash.
Cheers,
RedomRedom Syed | Confidence Finance
http://www.confidencefinance.com.au/
Email Me | Phone MeHome Loan Specialists based in Sydney, serving clients Oz wide.
Thank you. I’ve had a look at a few other threads regarding split loans so thanks for steering me in that direction.
Can I get your opinions on how I could use this $8,500 loan in a creative way. It was an entirely separate loan given to fund renovations on the house and also to consolidate other debts I had at the time.
It is at home loan interest rates and was over 30 yrs and has it’s own weekly repayments that are separate to the current IP loan.
So isn’t this loan essentially a split loan?
And therefore just increase the borrowing on that loan to “release equity” to fund the new PPOR?
Thanks for your time,
Jeffrey
Hi Jeff
Get a pro to sort this out for you – Terry has provided some good advice and has been around forever, why not hit him up.
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]
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