Debt recycling as First Home Buyer

Hi,

I'm a First Home Buyer actively in the market looking to buy our first PPOR. We have our Suncorp pre-approval ready and plan to go to an auction for a property in a few weeks' time.

Our plan is to buy this first property as a 'stepping stone', something that we can live in while we start our family, and upgrade when they go to school (in around 7 or 8 years' time). During these 7 or 8 years, I would like to invest into some IPs which will hopefully gain in value to help contribute towards that upgrade.

To that end, I am thinking of buying the PPOR with 88% LVR and pay the LMI, so that I can use the remaining cash to buy our first IP relatively soon. I've read Terry's tax tips on debt recycling and I was thinking of structuring the ~1.1m loan into:

• Loan 1 - Fixed - 800k
• Loan 2 - Variable - 200k
• Loan 3 - Variable - 100k

I'd then put my 100k cash into Loan 3 to close that off, and then take the money out for IP.

Where I'm little unclear is what options (financial products) are available for taking the money out?
Terry mentioned in his post that it'd be a Line of Credit, which is more flexible but also higher interest rate and 'at call'.
Can I take the 100k money out by applying for a new IO loan secured by the property? Or would this be akin to taking out equity, and therefore I can only get a loan for the amount below 80% LVR?

Any advice would be really appreciated.

Many thanks.

 

I would suggest it shouldn't be a LOC, but a term loan. just a standard variable loan with redraw.

 

I suggest using a lender that has a decent policy for cash out and more importantly a suitable product for Debt Recycling.
If you pay out and 'close' a loan split then you no longer have access to the redraw from that loan split.
Worth getting some specific advice regarding this strategy.

 

But per Lindsay (and my research), if the loan is paid out and closed then I don't have access to the redraw?

Sorry in advance if this is a silly question, but which type of professional should I seek advice from? Accountant, mortgage broker, tax lawyer...?

 

Make sure you don't close it.

Only lawyers or registered tax agents can give tax advice and only those with a credit licence (brokers) can give credit advice.

so it depends on what sort of advice you are after.

 

A FP can only give tax advice concerning a financial product under their AFSL which will be defined by the Corporations Act. Real estate is not such a product. It is area where they would be uninsured and iving unlawful tax advice. Tax practitioners are able to give more broad advice as they as suitably qualified to do so.

Para 3 is the operative issue : Financial advisers providing tax advice | ASIC - Australian Securities and Investments Commission

 

Some financial planners are also registered tax agents