Best loan structure

Discussion in 'Loans & Mortgage Brokers' started by Elicon, 2nd Feb, 2017.

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  1. Elicon

    Elicon Well-Known Member

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    Hi everyone,

    Partner moving from ppor and renting it out to live with me. Current debt as follows

    HL 270k initial purchase
    INV 152k and fully offset as funds never used.

    Property worth 600k and wants to leverage up to 480k. What would be best loan structure to maximise tax deductibility?

    I was thinking leave the 270k loan S is converted to an inv loan then do a further investment loan of 210k with offset and then use funds when opportunity arises? Will this work?

    Thanks
     
  2. Corey Batt

    Corey Batt Well-Known Member

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    That should be fine - put the 270k home loan as interest only if it hasnt' already.

    There's another $58k in accessible equity which can be released to bring it up to 80% LVR - you can either increase the INV facility or have a third split.
     
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  3. Elicon

    Elicon Well-Known Member

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    Thanks Corey. Would it matter if it's in the offset and not in redraw until the day comes of buying another investment property?

    Many thanks again.
     
  4. Corey Batt

    Corey Batt Well-Known Member

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    It comes down to your (or your accountant/lawyers) interpretation of the tax rulings.

    If you're concerned whether it's an issue parking the funds in offset, when it comes to purchase just cycle the funds through the loan by paying down the loan then drawing it back out - meaning you've effectively 'reborrowed' the funds.

    Before doing so seek advice from your broker, theres very specific differences between lenders on how to achieve this and you don't want to accidentally close your loan facility by DIYing it.

    You can otherwise borrow the funds via a line of credit if the lender allows it, and then switch the facility to a term loan after using the funds (as line of credits in general are exceedingly expensive these days).
     
  5. Terry_w

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

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    Not clear on what you mean. is the loan $270k and paid down to $152K or are there 2 loans?
     
  6. Elicon

    Elicon Well-Known Member

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    2 loans 270k fully drawn and 152k which is offset by same amount. So really 272k to get mortgage diacharged.
     
  7. Terry_w

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

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    Fully offset as the funds never used. Not sure on this either but it sounds like you have borrowed and parked in an offset account.

    So existing debt is $422k
    That means approx $58k extra borrowability without incurring LMI.
    $152k available on loan 2.

    If you rent the property the interest on the $270k may be deductible against the property income - if the $270k relates solely to the purchase of the property and there have been no redraws.

    The interest on the $58k loan would be deductible against any income this relates to - if you invest it.

    The interest on the $152,000 may also be deductible against any income it relates to. Assuming that this loan hasn't been contaminated by parking in the offset.
     
  8. Elicon

    Elicon Well-Known Member

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    Hi terry,

    Broker set this up for her. The 152k is parked in the offset since day 1!! Was this wrong? Should it have been done as a line of credit instead undrawn? Anyay around it to avoid contamination ?
     
  9. Terry_w

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

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