Advice on loan structure when covering PPOR to IP

Discussion in 'Loans & Mortgage Brokers' started by new_investor, 11th Aug, 2018.

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  1. new_investor

    new_investor Member

    Joined:
    3rd Sep, 2016
    Posts:
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    Location:
    VIC
    Hi all,
    Currently planning to convert my current ppor to an IP to upgrade to a new ppor. Wondering if the loan structure below is the way to go for max. tax deductibility?

    Current:
    PPOR - Valued at $725k
    Loan 1 - P&I - $220k (has an offset acc. attached to it)
    Loan 2 - IO - $148 (used as deposit on IP1)
    IP1 - Valued at $600k
    Loan 1 - IO - $476k

    Future:
    PPOR converted to IP 2 - valued at $725k
    Loan 1 - IO - $220k (converted from P&I to IO)
    Loan 2 - IO - $148k
    Loan 3 - IO - $190k (deposit for new PPOR)
    IP 1 - valued at $600k
    Loan 1 - IO - $476k
    New PPOR - valued at $800k
    Loan 1 - P&I - $640k

    Only tax deductible loans will be Loan 1&2 on old ppor(IP2) and Loan 1 on IP1. I'll switch the offset account to offset interest against Loan 3 against old PPOR(IP2).

    Hope this makes sense. Any advice or suggestions are greatly apprecaited :)
    Thanks guys
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Sounds alright.

    Consider rate too.
     
  3. new_investor

    new_investor Member

    Joined:
    3rd Sep, 2016
    Posts:
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    Location:
    VIC
    Thanks Terry,
    Appreciate the quick response. Do you mean interest rate?
    I've recently negotiated better IO rate on $148 and $476 and fixed both. Will definitely consider getting the lowest possible on $640k future one and the other two splits of $220k and $190k.
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    As an aside. ...... That's a slab of non deductible debt .


    Will you do Anything special to clean that up faster than normal ?

    Ta

    Rolf
     
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  5. new_investor

    new_investor Member

    Joined:
    3rd Sep, 2016
    Posts:
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    Location:
    VIC
    Thanks Rolf,
    I've currently got about $180k in offset against $220k loan which I plan on putting in a different offset against the new split of $190k. Once I've built up enough offset to clear that split + some buffer (6 months expenses), I'll start offsetting against the $640k.
    Apart from adding extra disposable income in an offset, there's no other strategy or anything special to clean it up any faster.
    Any hints/suggestions ?
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
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    Location:
    Australia wide
    Look at cost of holding large sums in offsets.

    Also you can shuffle loans around.

    See my strategies thread were I have written about both.
     
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  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,598
    Location:
    Gold Coast (Australia Wide)
    Have a chat with your planner on an active debt recycling strategy

    ta
    rolf
     
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