First PPOR - Large Deposit + IP Equity

Wondering if there is anything clever I'm missing.

Say we are looking at a $1.5m PPOR, bank is only willing to lend us $1m. If we've got plenty of cash, say $500k for the difference + enough for stamps, as well as an IP with about 200k equity.

Is there a better strategy than simply put down a higher deposit on the PPOR (~33% so 500k), borrow the $1m. And release equity down the track from the PPOR to debt recycle into shares?

Or is there is benefit if we utilise the 200k equity from the IP, put down $300k cash, and use the remaining $200k cash for investing? (I understand the 200k IP equity won't be deductible anymore). And we don't plan on converting the PPOR into an IP down the track.

Basically the situation: Bank only willing to lend $1m. But want to buy $1.5 property. Have cash and equity from IP. What options can we consider?

Cheers

 

Have you already released the equity to use, or does that still need to happen?

Equity isn't going to help if your capacity is tight - you need to borrow that as well.

Rule of thumb - use debt for investments and cash for PPOR/non-deductible debt. So if you've already released the equity, use that for your shares, and put your cash into your home.

 

You could potentially borrow the $200k secured by the investment property at owner occ rates and get a higher portion of the loans at OO rates and then debt recycle.

if the rate difference is 0.4% the interest savings could be $800 pa potentially.

 

but that might not work if servicing limted.

 

Did you go with a banker or broker?

I assume you got the borrowing capacity without a broker since you said "Bank".

There are lenders that will lend more then the major banks. So if borrowing capacity is what you're after, Then you should as a broker to a broker.