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Deposit for loan

Discussion in 'Property Finance' started by Brian84, 18th Oct, 2015.

  1. Brian84

    Brian84 Well-Known Member

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    Hi Everyone,

    It is getting close to the time when I will be able to borrow for an ip, I was just wondering if I can just use equity from my ppor to fund the whole purchase or do I need to add savings to it?

    If savings is needed what would be a minimum that the banks would look for? Is there an actual figure?
     
  2. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    If you have enough equity for a 20% deposit, stamps and other costs, then there is no need to use savings. You just need to meet serviceability requirements for both loans (PPOR equity pull and 80% LVR loan for IP).
     
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  3. Brian84

    Brian84 Well-Known Member

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    Ok thanks Alan, we should be right then.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Don't use any savings as you will be throwing tax deductions away.
     
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  5. Brian84

    Brian84 Well-Known Member

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    Thanks terry. Care to elaborate on that. I don't quite understand it.
     
  6. Redom

    Redom Mortgage Broker Business Member

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    If you borrow 105% of the new investment value, than you should be able to claim interest deductions on the entire 105%.

    If you use cash for 20-25% of it, than you can claim interest deductions on 80% of the property value as you'll have less investment debt.

    To borrow 105%, take out a separate split loan against one of your properties for 20-25% of the value of the new property your looking to purchase. Use these funds as your deposit and seek out the remaining 80% via another separate loan (so you avoid x-coll and each loan is secured by one property).

    Cheers,
    Redom
     
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  7. Greyghost

    Greyghost Well-Known Member

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    As Redom said.
    Then apply the savings you have against your PPR loan account - offset. So you reduce your non deductible debt.

    By using this method you have the same total amount of funds applied across your PPR and IP, just that the mix of deductible and non deductible is maximised!
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Brian84 likes this.
  9. Brian84

    Brian84 Well-Known Member

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    Terry_w likes this.