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advice for refinancing

Discussion in 'Property Finance' started by popoobox, 27th Aug, 2015.

  1. popoobox

    popoobox New Member

    Joined:
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    Location:
    Australia
    Would like to have an advice re: refinancing and redraw money..
    We have Ppor, paying P&I- rented out since we were at overseas for 1 year,
    Now we are relocating to different town for at least next few years, we are thinking of buying Ppor but to pay IO this time incase we move again, it will become IP
    We don't have much saving in hand so for deposit for second property, we are thinking of refinancing (change it to IO) and use redraw money.
    Q is if we refinance and withdraw money from our existing ppor to buy second property, will it become a mixed loan and tax undetectable?? we both are middle incomers
    Thanks,
    Sam
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes it will become a mixed loan. But this can be avoided by splitting the loan into 2 before redrawing. Then once you redraw on the smaller portion you can segregate this interest and not claim it. It won't be deductible as used for a PPOR
     
  3. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hi Sam

    Here's what I'd do.

    1. Release equity and split up current loan into two. This way - you can identify what loan is deductible (the current loan securing your current IP) and which isn't (the equity release which is being used to cover the deposit/costs on your new PPOR.

    2. Set up a new loan against your new PPOR to cover the remaining balance.

    So all up - you'll have three loans.

    Current IP
    Loan 1: IP loan
    Loan 2: Equity release to cover deposit/costs on new PPOR

    New PPOR
    Loan 3: PPOR loan

    If you're disciplined with money - set all loans up as interest only. Link up an offset to loan 2 or 3.

    Cheers

    Jamie
     
  4. Greyghost

    Greyghost Well-Known Member

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    Switch the old PPR loan (IP) to interest only and out the new PPR loan on P &I.
    Not the other way around and per your post. Pay down non deductible debt.
    I know you said you may move again, and as Jamie said you can set all up as interest only, but in the interim if you wish to have something on p&i then this way is better...
     
  5. popoobox

    popoobox New Member

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    Location:
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    Thanks for all your advices.
    Its clearer with explanation to get 3 loans... but more questions though.. sorry..
    Could I put equity release on new PPOR offset (so that I dont need to pay much interest)?
    Would it be a problem with tax deductibility once second PPOR becomes IP because I use money from first IP loan (although it is now split)??
    Actually I am hoping equity release would be significant amount, and plan to use it to buy more IPs in regional areas.
    Sam
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sam,
    no
    no
     
  7. popoobox

    popoobox New Member

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    Thanks, Terry. I have started reading your legal tips on the forum too. Very useful for new comer like me.
    Very inspirational to read all the investor stories too. I am way behind than most of the investors (given my middle age!). Anyway never too late :)
    Sam
     
  8. Heinz57

    Heinz57 Well-Known Member

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    But what is middle age Sam? All depends how long we plan to live!
     
  9. popoobox

    popoobox New Member

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    @Heinz57
    It's all relative, isn't it?
    53 is not too old to start everything??
     
  10. Heinz57

    Heinz57 Well-Known Member

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    Prime of life!
     
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  11. Richard Taylor

    Richard Taylor Mortgage Broker & Brisbane Buyers Agent

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    Brisbane
    Agree 53 prime of life and plenty of time.

    I am still 2 years behind you and plenty of fight in the old horse yet.

    Just avoid the mixed loan as it will cause problems in later life .......

    Cheers


    Richard
     
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