Forums / Getting Technical / Finance / Investment loan structure when ppor is paid off.

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  • Profile photo of YetYet
    Participant
    @yetend
    Join Date: 2016
    Post Count: 9

    Please can someone advice if I am on a right track.

    I have almost paid off my PPOR(priority). Two more repayments to go. I am considering to get equity release from my PPOR(25%), to buy investment property. Another 80% will be borrowed from different bank, secured by the new ip.

    Not sure if the equity release should be investment loan or owner occupied loan.
    I understand investment loan rates are higher than owner occupied loan.

    Any help will be appreciated.

    Thanks

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    That is generally how to do it.
    You would want to try to structure it so that you get as much of the debt on owner occupied rates to save interest. Depending on your current set up it might be better to secure 80% on the home and 25% on the IP!

    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 YetYet
    Participant
    @yetend
    Join Date: 2016
    Post Count: 9

    Hi Terry,

    Thanks for your help . Will the above 80% you mentioned on owner occupied loan tax deductible? The purpose of loan will only be for future property investment.

    Thanks

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    Hi Terry,
    Thanks for your help . Will the above 80% you mentioned on owner occupied loan tax deductible? The purpose of loan will only be for future property investment.
    Thanks

    The use of the funds determines deductibility, not the original purpose, or what the bank classifies the loan as.

    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 YetYet
    Participant
    @yetend
    Join Date: 2016
    Post Count: 9

    Thanks Terry.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,065

    Sounds like you’ve got the correct structure in mind.

    The loans don’t have to be via two different lenders – you can have the two loans (equity release and IP) with the one lender and still keep the loans uncrossed. The benefit here is that you’ll be able to negotiate a better rate discount due to the higher aggregate borrowings. If you’re on a pro pack you’ll only pay the one annual fee too.

    What are your longer term plans? If you’re considering purchasing another IP down the track it might be worthwhile releasing additional equity now rather than later.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    melcoppola
    Participant
    @melcoppola
    Join Date: 2007
    Post Count: 1

    HiJaime,
    I am ready to refinace my 3 investment properties and PPR.
    How do I go about doing this?
    Mel

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 11,992

    Hi Mel

    Matter of working out the structure you currently have, what you want to achieve from the refinance and then what your future goals are going forward.

    What we often see is a client with a mass cross collateralised mess and this can often take a while to undo but with an appropriate choice of lender and correct structure it can set you on your way to achieve your financial dreams.

    Have a read of my API article and you will see what i mean. I can certainly email you a copy of you would like.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    HiJaime,
    I am ready to refinace my 3 investment properties and PPR.
    How do I go about doing this?
    Mel

    Just see a broker. Choose a lender and then make the application.
    Get some tax advice along the way to see if you can implement any strategies to debt recycle to speed things up.

    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/

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