Should I make a separate loan account for the portion of drawn out funds (deposit)? so that we can deduct the Tax money from a new invest property?
Is the Draw funds 90k as a equity loan, right?I am currently discussing with a broker….
1. Draw funds out of existing property increase after refinance my home loan (P&I).
450k re-value (current home)
– 270k outstanding
– 90k funds out
2. Using the drawn out funds to buy a new inv property, and to set up a invest loan (Interest Only).
– 360k property price
– 90k deposit
= 270k a new loanI’m no expert I would say yes because it’s easier to divide between properties and sounds like PPOR too so even more important.
In terms if mortgage repayments the banks will normally insist on what the best savings are using offsets etc.
Pretty sure in regards to tax so long as you calculate right it doesn’t matter, but it’d be hard to work out if things were all put together. I’m sure someone knows more than me and will help you more.
Yep that’s how to set it up to avoid x-coll. :)
A few tips to maximise the structure your employing – it may make sense to:
a) get a couple vals done on your PPOR – often their are variances in valuations. May make sense to use the highest val.
b) If possible and suits you: turn your PPOR to I/O too – by reducing your contractual repayments, this will increase your borrowing power moving forward.
c) pay your stamp duty/other costs using borrowed funds. Therefore your total new borrowed funds should be 360k + closing costs. Take out 90k from your PPOR (up to 80% LVR), and then take out a loan for 80% of the new Investment. Put remaining ‘borrowed equity’ in the offset for future use.Cheers,
RedomRedom Syed | Confidence Finance
http://www.confidencefinance.com.au/
Email Me | Phone MeHome Loan Specialists based in Sydney, serving clients Oz wide.
Hi Joe
Yep – important to set up second split against PPOR.
You then set up a third loan against the IP.
Best not to place borrowed equity back in an offset though – instead, place it back in the equity loans redraw facility for future use.
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]
Thank you everyone,
Please correct if i am wrong. Based on your suggestions, I may ask my broker as follows:
Loan account 1. the refinanced home loan (P&I) against PPOR.
– 450k re-value (current home)
– 270k outstanding
– 90k funds outLoan account 2. an new equity loan (90k) (I/O) against a new IP.
– 90k funds out from the loan#1.
– Left out funds put in this offset.Loan account 3. new loan against a new IP (I/O).
– 360k property price
– 90k deposit+closing cost
= 270k a new loanJoe – loan 2 would be secured by the PPOR.
Do not redraw funds and place into an offset as they will not longer be borrowed funds.
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
Thank you, Terrw.
“Do not redraw funds and place into an offset as they will not longer be borrowed funds.”
Sorry, I am not clear to me this. Can you elaborate about this?
Thank you, Terrw.
“Do not redraw funds and place into an offset as they will not longer be borrowed funds.”
Sorry, I am not clear to me this. Can you elaborate about this?
Interest on money borrowed to invest can be deductible under s8-1 ITAA97.
But borrowing to place into a savings account means the money is no longer borrowed money, but cash. If this cash is later invested the direct connection between the borrowing and the investing is not there.There is an argument that the funds can be traced to the loan. However if the savings account contains other funds then the loan will be mixed and certainly all the loan interest will NOT be deductible.
Don’t do this without getting tax advice.
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
Thank you for the details. I will be careful about that.
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