Constructive loan structure advice required

Discussion in 'Loans & Mortgage Brokers' started by The Prestige, 15th Dec, 2018.

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  1. The Prestige

    The Prestige Well-Known Member

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    Hi Guys,

    I have been given an inheritance and looking at investing in my first property. Here is my situation

    PPOR valued at $500 000
    Owe $288 000

    Inheritance $310 000

    Currently parked most of the inheritance in an offset and extra in a savings account.

    Just looking for some general advice for loan structure and from a tax perspective.

    I don't want to box myself in for opportunities in the future.

    My wife and I have a combined income of $148 000

    I would like an offset on both loans and the investment not secured against my PPOR

    Cheers
     
    The Prestige, 15th Dec, 2018
    #1
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Depends on a few things

    firstly keep ALL your cash

    secondly, try and borrow 105 % of the total land and build cost.

    assume for a minute the land and build and costs is 525

    secure 125 ONLY to the ppor, and thence 400 only to to be the land and Build

    that removes the need for cross coll and allows the max tax benefit

    All that may not be possible if the income to debt ratios dont work out, but a variation of the the same theme would work

    Who is your current bank ?

    ta
    rolf
     
    Rolf Latham, 15th Dec, 2018
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  3. Terry_w

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

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    get some specific advice from someone qualified. You might want to pay your loan down and redraw to invest so you can get owner occ rates on investment use
     
    Terry_w, 15th Dec, 2018
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  4. Harper Lee

    Harper Lee Member

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    The best way forward is to look at the tax structure first and balance out what you need in regards to tax deductions today and the CGT component when you sell in the future. You'd need to speak with an accountant about that and model your cash flow today and the future to determine a good investment vehicle. I think Newcastle is looking pretty good especially if the port development goes through. I just moved to Melbourne from Merewether and miss the weather already.

    You don't have to cross collaterise your home with an investment property most of the time, so that is not a real issue. If you're looking to do a loan to cover the purchase price + costs, it is possible without using your home for equity release. Since you have significant cash, you can use a portion of it in the form of a term deposit to secure with your investment property.
     
    Harper Lee, 15th Dec, 2018
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  5. jazzsidana

    jazzsidana Well-Known Member

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    Good call on not cross collateralising properties and it surely won't be required ...

    And best to sit down with your accountant before pulling the trigger.

     
    jazzsidana, 15th Dec, 2018
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  6. The Prestige

    The Prestige Well-Known Member

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    Hi Rolf thanks for the reply! Yes I have kept all the cash liquid. My 'bank' is Newcastle Permanent. So just so I'm clear, this senario even with some dept still residing in my PPOR the purpose of the loan is for investment. Hence able to gain the max tax benefit. Cheers mate
     
    The Prestige, 16th Dec, 2018
    #6
  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Im not a tax guy, but our clients have had this type of 25/80 lend for 20 years and their tax people have been ok. Perhaps ask your own adviser in that area pls.

    Typically the purposes of all loans is for that investment.........the security being not relevant to deductability, but does hurt to confirm with your tax person .


    ta
    rolf
     
    Rolf Latham, 16th Dec, 2018
    #7
  8. The Prestige

    The Prestige Well-Known Member

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    Hi Tez thanks for the reply! Does this still have the same tax benefits as Rolfs scenario? Do you know of anyone that you can recommend in the Newcastle area? Sorry for these questions but I'm and electrician an all of rhis is new to me. Cheers
     
    The Prestige, 16th Dec, 2018
    #8
  9. The Prestige

    The Prestige Well-Known Member

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    Ok what made you move? Merewether is a great spot! Seems like a need to sit down with a tax accountant as Rolf and Tez have said. Thanks mate
     
    The Prestige, 16th Dec, 2018
    #9
  10. Terry_w

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

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    You will still be able to borrow in full for the investment property so, if you set up right, you could claim 100% of the interest. But you might be saving a few thousand per year in interest payments because you are getting owner occupied rates on some of it.

    You can seek advice on the tax side from a lawyer or a tax agent.
     
    Terry_w, 16th Dec, 2018
    #10