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Borrowing from IP for PPOR

Discussion in 'Property Finance' started by Grammarian, 26th Jan, 2016.

  1. Grammarian

    Grammarian New Member

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    Long time reader, first time poster - I am inheriting 60% of a deceased relative's property which is worth about $300,000 - $310,000, fully paid off. After costs have been paid out to the other beneficiaries, I should receive about $170,000.

    Due to past mistakes, we do not own a PPOR and are renting but would like to buy a home now. With other savings and shares, we can access another $150K or so, which would give us a reasonable deposit.

    We were going to sell this inherited hpme, but I'm now thinking of paying out the other beneficiary, and keeping the property as an IP. Therefore, I would be paying out $120K after costs.

    My question is - would I be able to borrow 80% of the value of this house, giving me say, $240,000? I would have paid out the $120K but could now have access to $240K AND have an IP, (without paying stamp duty) which would probably be slightly cashflow negative for a couple of years. We would also save by not having to pay agents' fees to sell the property, and any improvements I make would be after buying out the other beneficiary, therefore benefiting me only.

    In other words, I'm just wondering whether having an IP would impede our borrowing capacity to buy a home.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes you could borrow - as long as you meet serviceability etc. You would have to pay stamp duty though, unless the will provided some flexibility.

    But this would impede your ability to buy an main residence because you would be taking on a debt. But the LVR would be low so the impact may be minimal.
     
  3. Grammarian

    Grammarian New Member

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    Thanks Terry. I didn't think I'd have to pay stamp duty.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    It's likely that you would pay stamp duty on the 40% that you're considering purchasing off the other heirs.
     
  5. Grammarian

    Grammarian New Member

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    OK, thanks for that. In any case, the stamp duty won't be a huge factor it's more the ability to have both an IP and purchase a home.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    There may be ways around this so seek legal advice.