Join Australia's most dynamic and respected property investment community

Finance dilemna

Discussion in 'Property Finance' started by SueA, 10th May, 2016.

  1. SueA

    SueA Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    89
    Location:
    North brisbane
    Hi Guys Hope someone can help. Waiting to hear from our broker who I feel should have been on top of this as she was looking at our loans a few months ago and probably should have warned of this end of interest only set up. As follows, have a loc on ppr , with 3 splits with .Adelaide bank.
    Loan 1 333k split, owe 94k, available funds 239k (for new vehicle)
    loan 2 40k split owe 0, in credit, available funds 50k ( everyday account, rents in , int out, bills, living
    loan 3 75k split owe 35k, available funds 40k. (weekender)
    Received letter from Adelaide to say that as at 1st July, loans coming off I/O and balance owing will become your new credit limit. Any available credit will not be available after this date. If you have no balance owing balance is nil. So all available funds will disappear.
    We have plans for about 200k in July/Aug for a new business vehicle, and prefer to have money available and not have to risk refinance since changes. No problem to pay P/I loan payments
    Question. Can I just withdraw all of these funds available now and move to 3 different bank savings accounts with another bank to keep interest claimable , use for vehicle purchase then do a refinance somewhere else on whatever funds are still owing after purchase? None of this account is linked to investment properties, they are all stand alone.
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,781
    Location:
    Perth WA
    Hi Sue,

    If you take the funds and put them in an unrelated bank account, the interest will not be deductible as putting them in a bank account is not a deductible purpose.

    If you don't want to trigger a new assessment or refinance, transferring the funds into an offset account against the loan split the funds are coming from will most likely be the best way to keep your access to them.

    Otherwise if a refinance is an option, you could just move lenders to someone who won't have an issue with your funds in redraw. You could restructure at the same time and have the loan splits reflecting their purpose, for eg, one split just for the car, one for personal use etc.
     
    SueA and Jamie Moore like this.
  3. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,159
    Location:
    Canberra and Sydney
    Agree with Jess - see if you can park the funds in a dedicated offset or refinance.

    Perhaps hit up Jess for further advice? I'm sure she could assist.

    Cheers

    Jamie
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,173
    Location:
    Gold Coast
    Typically io extension will fix that

    Should be tick and flick

    Ta

    Rolf
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,033
    Location:
    Sydney
    An alternative that MAY work is to withdraw funds, keep anywhere, and then pay back into the LOC account at a later date. It should work from a tax angle, but not sure if this will keep your limits in place on the lender side of things.
     
  6. SueA

    SueA Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    89
    Location:
    North brisbane
    Thanks guys, not sure how to reply to all of you at once with quotes. Extremely tech challenged, would rather dig a trench .
    Our broker got back to me last night. I suggested another offset but she said all linked offsets/splits will revert to whatever is owing so any funds moved to this account would be lost also.
    Can't do extension to IO as 10 years is up, we have borrowed and paid out this loan quite a few times over the 10 years, for deposits for IP's, truck, trailers, forklifts etc.
    She doesn't know a bank that would allow the same setup as we have now, to have hundreds of thousand just sitting there in case we want to use it.
    Don't mind refinance elsewhere if guarantee of funds being available , but do other banks still allow this , so she is looking at an internal refinance, about $1400, with Adelaide,
    She thinks nothing will change with our loans, basically a refinance, new 25yr loan, 10yr I/O . Will start this today, see if it is panning out, if not my plan B is to call Jess:), or Plan C, withdraw funds , park in other banks account, worst of this is will be paying P/I on about 400k, buy truck, then do a complete refinance elsewhere once I know end figures. My thinking, like Jess is interest wouldn't be claimable as I am not actually using it for anything.
    Thanks again for your thoughts.
     
  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,159
    Location:
    Canberra and Sydney
    A normal interest only term loan with any big 4 bank should do the trick.

    Cheers

    Jamie
     
    SueA likes this.
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,033
    Location:
    Sydney
    And I suggest a 30 year loan rather than 25 as this would help with servicing both now and in the future.
     
  9. SueA

    SueA Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    89
    Location:
    North brisbane
    We are 50 so may not even get a 20 year loan. Not sure why she is resistant to going to another bank then if it is as simple as a big bank, I/O. Have said numerous times happy to switch lenders as Adelaides rates aren't the greatest anyway., and have read not to have everything with one lender, which we do. We have not long come off a fixed loan for an IP and they offered 5.89, I declined, broker came back at 4.49 with no fees. This was easier than changing for a bit lower rate. She is getting back to me Friday so will go from there. Thanks again
     
  10. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,159
    Location:
    Canberra and Sydney
    50 should be fine - especially for a 20 year term if that's what you're after.

    Cheers

    Jamie
     
  11. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,782
    Location:
    Perth
    We have a loan that is secured by a property that has hundreds of thousands just sitting there in case we want to use it, so it can be done. Ours is with ING Direct.

    There is a way to invest cash and have it claimable through taking out a loan that is secured by the cash (in the form of a term deposit). It's not ideal but it might work as a Plan C if you can't organise a better solution.

    We worked on a thread earlier that discussed this concept: Cash secured loan

    Terry also has some tax tips that might be relevant:

    Tax Tip 60: Never use cash to invest
    Tax Tip 62: Paying Cash for a property and then getting a loan
     
    SueA likes this.
  12. SueA

    SueA Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    89
    Location:
    North brisbane
    Thanks Perthguy, will read up on all, so I am better informed and have a few ideas when I speak to her. Although sometimes the more I read the less I seem to understand. :confused:
     
  13. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,781
    Location:
    Perth WA
    50 is a spring chicken ;)

    Like Jamie, I really can't see the issue here - it should be very straight forward. The available cash to redraw is not that much in the scheme of things - many people have lines of credit for much higher amounts, which is literally having hundreds of thousands sitting there until you need it.
     
  14. SueA

    SueA Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    89
    Location:
    North brisbane
    Ha Spring Chicken.... Cooked goose if I don't get it sorted!! I guess reading all the doom and gloom re Apra? I thought it was going to be an issue. But from the sounds of it, I am not so panicked to get it done, If she doesn't come up with a solution that we like. Roughly if you know, what would another banks interest rate be, so if she comes back with Adelaide and a high rate, I have an idea if it is ok or not., Looking at online rates is confusing the issue more. We can draw out the cash from the personal part of loan and leave other 2 that are deductable until resorted. Get one of you to start new applications for what you have advised. I am pretty certain she is not concerned about serviceablilty as we collect just over 2k a week rent, and total LVR of about 49% over all our properties. Last income had also increased.
     
  15. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,781
    Location:
    Perth WA
    Online rates are pretty unhelpful in some cases - they're a point to discount from. :)
    What are the loans secured against?
    With $1.4M after the rate cut you'd be in the 3's variable with a PPOR with CBA. Low 4's for IP.
     
  16. SueA

    SueA Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    89
    Location:
    North brisbane
    We have 4 fixed loans with Adelaide, total 1.1m, all stand alone. LOC above is for our PPR, amounts owing are for IP5 deposit and weekender land.
    Wanting to have same set up .LOC about 50k, 2 splits to keep ip purchases separate for ease of tax calculations. PPR value approx. 600k