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Am i doing this right or am i stupid?

Discussion in 'Property Finance' started by Darlinghurst Boy, 9th Jul, 2015.

  1. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

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    Ok my situation, I hope you guys can give me some advice.
    I dont know who to seek advice from.

    Property i want to invest in.
    Currently rents for $600 per week,asking price is 530/ $540,000 add stamp duty 20k =550

    There are a number of reasons why i like the property but my plan modtly is to move to the area in a few years.

    Ok i have $400,000 cash plus equity of $220,000 from the Bank( i can get more)PPOR.
    I dont want to spend ALL of the $400k , so am thinking this way,
    I spend 350k of the 400, and take oout 200k from the equity from my PPOR

    350,000 my own cash plus take out 200,000 from ppor equity will give me then adds to $550,000
    Rental return is $600 per week, $2400 a month.
    I will then have to repay $1073 per month repayments on my PPOR

    Negatives is i will only have 50k in my life savings but a PPOR debt of $200,000
    Positives is i will own the IP outright .

    Maybe I could eventually transfer the PPOR debt to the IP debt??? I wonder if thats possible??
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    It depends if you're ever going to live in the new ip.

    If you aren't sure I would use enough equity to cover the deposit and cost and borrow the rest.

    Aim for no ppor debt and max ip debt.

    Any cash should be in an offset against your ppor.
     
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  3. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

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    Yes thanks Jess, i actually said this to the coombank loan officer, i said im concerned i cant claim any tax deductions using my PPOR as debt, he said no you still can if you take out equity out of your PPOR for an IP.
    He said he was positive you can do this and even asked who told me i couldnt
     
  4. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    "Aim for no ppor debt and max ip debt.
    Any cash should be in an offset against your ppor."

    +100 Jess
     
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  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    You can if it's set up correctly - if you just top up and put the funds in offset it creates a mixed purpose loan which can get messy very quickly.
     
  6. Hodor

    Hodor Well-Known Member

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    +1 for what jess said. Preserve your cash in an offset. Much better flexibility.

    Also a redraw is not the same as an offset account. Heard of people falling for that trap too.

    Goodluck
     
  7. wylie

    wylie Moderator Staff Member

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    I would also advise seeing a broker rather than direct with a bank. The bank johnny isn't going to tell you where you are about to slip up and mess up your deductibility, or the best loan for you, or how to structure the purchase.
     
  8. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

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    You maybe right about seeing a broker, i have one already through my coombank loan .
    She is with Smartline but never returns my calls. And now shes on holidays.

    I phoned Commbank to ask if i could change brokers they said it was up to me but to write them a letter.
    Does the broker still get any money from my low monthly mortgage fee ?
    I prefer to change Broker actually.
     
  9. Hodor

    Hodor Well-Known Member

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    Don't ask a bank for a broker, Get one independently. My understanding is the broker that wrote the loan gets trail in most cases. Don't worry about that, a good broker won't and will only look to be helping you with future loans.

    Plenty of good brokers posting here. Why not give one a call? Can only help
     
  10. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    The broker will still get trail as long as you don't refinance the current loan - but you most likely will when you do the equity release.

    If your current broker isn't providing good ongoing service I wouldn't be too concerned about the trail ending.
     
    Last edited: 9th Jul, 2015
  11. Befuddled

    Befuddled Well-Known Member

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    A bank broker screams of conflict of interest. A NAB broker will not steer you to a product from CBA for example
     
  12. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

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    Yes i will have to write a letter to Commbank asking this Smartline Finance Company Broker be taken off any trails or commissions as she is not interested in calling me back for loans.
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Don't take tax advice from a bank - or loans advice.!!!
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I agree with Jess

    Just use 20% deposit if you have to (ideally borrow 104% setting up a separate split on the PPOR loan).

    Keep your cash for emergencies and retirement.
     
  15. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

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    I may have to come and talk to your Company Terry, you are only about a 5 minute walk from me as im in Oxford Street.