How best to fund the 9k shortfall without using cash?

Discussion in 'Loans & Mortgage Brokers' started by Owlet, 19th Feb, 2017.

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  1. Owlet

    Owlet Well-Known Member

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    I have an IP settle at the end of the week. I have left it too late the structure and release funds in a beneficial manner. Basically I am 9k short of the funds I need to complete. I have savings which can cover this. Ideally I would have like to have used borrowed funds.
    A possible solution is - do a cash advance on the credit card to cover this gap - which is borrowed funds. I have a PPOR offset with 100% in it. Organise this offset to be split into two. Pay out the IP split which will reset it for use for investment purposes. Pay back the credit card with the borrowed money and maintain deductibility?

    Any suggestions?
     
  2. dabbler

    dabbler Well-Known Member

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    You could do that. Or maybe a deposit bond, but is it really worth the effort ?

    Why does it take your bank more than a few days to do a new split ?

    Also, for that amount, it wont take long to do a split and rack up 9k by paying bills etc in first year.
     
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  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    No point in splitting an offset account as it is not borrowed money.

    Can you borrow from someone else and refinance this later?

    $9000 x 5% = $450 per year which is probably around $167 in potential tax savings. Not a big deal, especially if your PPOR is effectively paid off.
     
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  4. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Spot on - I wouldn't worry about it too much given the small savings.

    Cheers

    Jamie
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Still that is better than a poke in the eye with a blunt stick!
     
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  6. Owlet

    Owlet Well-Known Member

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    Thanks for the feedback

    I meant the splitting the loan that was offset. This may be done in time. Its not a huge difference but better to use someone else's money.
     
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  7. Redom

    Redom Mortgage Broker Business Plus Member

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    Plenty of banks won't do 9k splits, so may need to be 10-20k (depending on lender & splitting rules). Just bear that in mind while working it out.
    Its not a large amount. With some, the ongoing splitting costs (e.g. nab broker @ 10p/m) would offset much of the gains.
     
  8. Owlet

    Owlet Well-Known Member

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    We can have unlimited free splits. Split will be 20k - covers the 9 and then allows 11k for renovations.
     
  9. Dean Collins

    Dean Collins Well-Known Member

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    Aren't you going to pay down the IP at all......ever?

    I mean we are paying down our IP's at a rate of $10k a month (with the view to borrowing for the next property next year, rinse and repeat).

    Why not just pay the $9k now as you'll be paying it down by that much in a few months from now anyway right?
     
  10. JacM

    JacM VIC Buyer's Agent - Melbourne, Geelong, Ballarat Business Member

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    For a tax saving of $146 it's not worth the bother of doing the paperwork.
     
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  11. Owlet

    Owlet Well-Known Member

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    Dean and Jacqui your points are valid.
    Yes I plan to pay off the properties - at this point all surplus funds are going towards offsetting a different IP.
    I always find it ironic on here when we speak of buying under market value and negotiating a lower price when purchasing yet don't see any value in saving in this case $146.
    Across a large portfolio - $200 here and there, whether it be tax savings, reviewing insurance premiums, reviewing interest rates etc can add up to a significant amount which in turn could be the deposit on the next property or to be invested in other asset classes.
     
  12. legallyblonde

    legallyblonde Well-Known Member

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    It is up to you. It sounds like you have a few options that could save you money but might cost you hours of paperwork and unnecessary hassles... to me... my time is very valuable... I would just use cash and make sure i am more organised next time.
     
  13. dabbler

    dabbler Well-Known Member

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    If your splitting the PPOR loan, then yes, if practical, do it.... with the aim to convert all non deductible.

    Buying under market is not a matter of 150 bucks, no one is saying ignore the savings, but if it is not practical or wastes too much time, then do not worry *this* time, only you can decide if it is worthwhile.

    PS have you decided yet ? will your lender jump for you ? :)
     
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