Best structure to purchase PPOR

Hi everyone,

Just a quick one on the best way to structure a potential PPOR purchase.
Current situation :
3 IPs approx. total value $1,700,000

Total debt against them $341,000 and $20k HECS debt

Income
Partner circa 100k- Marketing
Myself $47k base- RE sales

Renal income $1120 / per week

We now will be in Sydney for the foreseeable future with the birth of our first child next year and securing decent jobs.

Based on the above, we are thinking to buy something instead of renting and have our own home.

What would be the best way to do this from a tax / accounting perspective or simply the best way to structure the purchase with the loans etc.

Thanks in advance

 

Do you have any cash?

If not, just doing an equity release from the IP's will be the best way to get a deposit ready so you can avoid LMI.

You won't be able to claim any of the PPOR debt, despite the fact the loans will be secured by investment properties - it's the purpose that determines deductibility, not the security.

 

Consider buying in one name
80% LVR loan secured on new property. PI. Multiple splits.
26% secured against existing property. Ideally with same lender.
Owner occupied rates on both

 

Sorry got interupted

You then use the splits to debt recycle down the nondeductible debt with owner occupied rates.

 

Hi @Terry_w , can you please tell me what you mean by 'using the splits'?

So let's say - $850k PPOR
1x 80% loan (secured against new PPOR) = $680k (@Ppor rates)
1x 26% loan (secured against existing IP) = $221k (@Ppor rates)

I've never owned a PPOR and am new to debt recycling.

I don't understand what difference it would make if this $680k was split into multiple loans or just one big one? It is so you can 'fully' make a smaller loan 100% deductible earlier?

 

Saves you from either
a) mixed loan, or
b) going back to the lender to ask for a split later.

Explained here:
Tax Tip 13: Simple Loan Structuring Strategy Tax Tip 13: Simple Loan Structuring Strategy