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  • Profile photo of MohsenMohsen
    Participant
    @m-haji
    Join Date: 2016
    Post Count: 2
    July 15, 2017 - 7:35 pm

    Hi everyone,
    I ve bought my own house 2 years ago and now my wife is working and we have a good saving each month.
    I need to know what I should do with our income. I am thinking in 2 ways and I need to know your opinion in that.
    First option: put my income in the bank until it is enough as 20% deposit (not paying LMI) plus other buying cost and then buy an investment property.
    Second option: put my income in my current home loan to pay less interest and when it is enough cash then using home equity to buy an investment property.
    I know with the second option I have more loan with tax deduction benefit while with the first option just have 80% of the new investment loan as tax deduction.
    I really do not know which way is the best. Does it make any different with my borrowing power?
    Please give me your thought.
    Cheers

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    July 16, 2017 - 2:30 pm

    Definitely put your surplus funds in an offset account linked to your PPOR loan split or straight into the loan itself by way of a principal reduction.

    You can then set up an equity split for the deposit etc secured against the PPOR.

    Yes it will benefit your borrowing capacity in the long run.

    Remember it likely if your IP loan is > 80% it will have to principal & interest so why not maximise the deductions. LMI is a deductible expense anyway (over 5 years or the term of the loan whichever is lesser) so if your wealth creation strategy involves buying property then why hold off merely because of the LMI.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of MohsenMohsen
    Participant
    @m-haji
    Join Date: 2016
    Post Count: 2
    July 16, 2017 - 3:35 pm

    Thank you so much Richard for your great thought.
    I am not at high income level at this stage. If I use my existing equity to buy IP then I should have 3 separate loans, my PPOR + equity+ the rest for covering IP price, So my main concern is if I am eligible to get such amount of the loans?

    and second question: could you please explain this more for me:”Remember it likely if your IP loan is > 80% it will have to principal & interest so why not maximize the deductions”.

    Thank you so much for your time.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    July 16, 2017 - 6:24 pm

    Recycle debt by paying down the non-deductible main residence debt and then reborrow against the main residence to invest – making the interest dedctible

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

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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