Forums / Getting Technical / Finance / 105% loans possible? Or any other ideas to

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  • Profile photo of rhodesvrhodesv
    Participant
    @rhodesv
    Join Date: 2004
    Post Count: 6

    Is it possible to borrow 105% for an IP? Perhaps with a locked offset that contains 25% deposit? The reason is to maximise tax deductions for a first IP, when I would like to extract the deposit back at some point in the future, when the value has risen, perhaps to buy a PPOR.

    Failing that does anyone have a better suggestion? I am trying to think of options for my young adult son, as buying a PPOR in Sydney as a first property is out of the question, so thinking of cashflow +Ve property, to help accumulate a bigger deposit.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    Yes it is.

    You could give 2 forms of security –
    1. the property
    2. a term deposit

    e.g.
    $100,000 purchase price with $5,000 duty and costs = $105,000 needed.
    Place $25,000 in a term deposit and borrow $25,000 against this
    Borrow $80,000 secured against the property

    But this will be a bit painful for the banks to implement.

    What about the alternatives

    A. You lend him the deposit – $25k under a written loan agreement on arms length terms.

    B. Parents property used as additional security and he borrows $105,000

    C. Gift

    I would favour A.

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

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

    Profile photo of rhodesvrhodesv
    Participant
    @rhodesv
    Join Date: 2004
    Post Count: 6

    Thanks Terry that is excellent advice. I had considered various options of getting involved but had not taken my thinking that one step further that of course if I wrote it all up it would create a clear paper trail for the ATO and he could repay it by refinancing at some point, and putting his deposit into an offset on the larger loan. Thank you!

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    Make sure you seek legal advice.

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

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

    Profile photo of SchnakeSchnake
    Participant
    @schnake
    Join Date: 2014
    Post Count: 11

    Yes it is.
    You could give 2 forms of security –1. the property2. a term deposit
    e.g.$100,000 purchase price with $5,000 duty and costs = $105,000 needed.Place $25,000 in a term deposit and borrow $25,000 against thisBorrow $80,000 secured against the property
    But this will be a bit painful for the banks to implement.
    What about the alternatives
    A. You lend him the deposit – $25k under a written loan agreement on arms length terms.
    B. Parents property used as additional security and he borrows $105,000
    C. Gift
    I would favour A.

    LOL!!! Go with opton C.’Gift’ Its the done thing apparently…see here

    • This reply was modified 2 years, 11 months ago by Profile photo of Schnake Schnake.
    Profile photo of rhodesvrhodesv
    Participant
    @rhodesv
    Join Date: 2004
    Post Count: 6

    LOL right back Schnake, that would certainly be his preference. It’s hard to get a start in Sydney, and it’s not possible to take the same path we did. Our starter PPOR was $145k in 1993, it just changed hands again for nearly a million. Just been trying to think how to advise his way forward.
    And thanks again Terry I’ll talk to our accountant about how to set it up, and my lawyer about the wording in the contract.

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