Join Australia's most dynamic and respected property investment community

Help on loan setup

Discussion in 'Property Finance' started by edge10, 27th Jul, 2015.

  1. edge10

    edge10 Member

    Joined:
    27th Jul, 2015
    Posts:
    12
    Location:
    Melbourne
    Hi,
    I would like to know the best way to go about investing into property.

    I currently have a loan that is $320, and the house is worth $620. What is the best way without using any of my own cash to invest into property.. I can see myself staying in our current home long term as in I have no plans on moving ( I do NOT want to turn it into a investment property). This is where I want to live.
     
  2. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    706
    Location:
    Sydney
    At 80% LVR you have $176,000 in equity so you should pull out the equity and structure the loan as follows:

    Loans against current PPOR:

    Loan Account 1: $320,000
    Loan Account 2: $176,000

    Loan against IP:

    Loan Account 3: $xxxx

    Do NOT a) increase the $320,000 to $496,000 and b) cross securitise the properties.
     
  3. edge10

    edge10 Member

    Joined:
    27th Jul, 2015
    Posts:
    12
    Location:
    Melbourne
    ok, under Loan against PPOR do I make it Interest only or leave it as Interest and Principal?>
     
  4. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    706
    Location:
    Sydney
    I would keep it IO so long as you are disciplined with your funds due to the following reasons:

    1. Enables higher borrowing capacity (for the time being)
    2. You are contracted to make lower repayments (will work well if cash-flow isn't there on a particular month)
    3. Higher negative gearing if you convert the PPOR into an IP in the future
    4. Allows you to accumulate cash faster in the offset in order to use as a deposit for the purchase of another property.
     
  5. edge10

    edge10 Member

    Joined:
    27th Jul, 2015
    Posts:
    12
    Location:
    Melbourne
    ok , one more question would you recommend
    Loan Account 2: $176,000 to be a Line of Credit or would you say this is a bit risky?
     
  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    706
    Location:
    Sydney
  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,682
    Location:
    Canberra, Brisbane and Sunshine Coast
  8. edge10

    edge10 Member

    Joined:
    27th Jul, 2015
    Posts:
    12
    Location:
    Melbourne
    thanks guys very helpfull
     
  9. edge10

    edge10 Member

    Joined:
    27th Jul, 2015
    Posts:
    12
    Location:
    Melbourne
    just before I go. what is a Term loan.. I have never heard of this before..
     
  10. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,552
    Location:
    Perth WA
  11. edge10

    edge10 Member

    Joined:
    27th Jul, 2015
    Posts:
    12
    Location:
    Melbourne
    thanks Jess, would you say the biggest difference then is
    Line of Credit means I only pay interest on what I have used

    whereas the Term loan I will be paying interest on the entire amount regardless of what I have used from it.

    is this correct ?

    if I am using any of these methods to purchase an Investment property can I still claim the interest as it was used to purchase an investment property ??
     
  12. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,682
    Location:
    Canberra, Brisbane and Sunshine Coast
  13. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,552
    Location:
    Perth WA
  14. edge10

    edge10 Member

    Joined:
    27th Jul, 2015
    Posts:
    12
    Location:
    Melbourne
    thanks Jamie, and Jess,, with the term Loan if used to buy Investment "A" can I claim the interest ?
     
  15. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,552
    Location:
    Perth WA
  16. edge10

    edge10 Member

    Joined:
    27th Jul, 2015
    Posts:
    12
    Location:
    Melbourne
    excellent.,, thanks once again...