Investment loans - valuation issue

Ok how would this work?

Property 1 geared to 60%

Property 2 geared to 80% when acq (recent)

Attempting to refinance both inv loans to new lender - but not cross-collateralise.

Property 2 coming in >80% lvr at most recent val commissioned by new lender.

If I reduce loan on 2 by increasing loan on 1, is increase on 1 still deductible debt?

 

It could if you do it right, paying one loan out with another is a refinance and doens't change deductibility generally.

 

Thanks Terry, think I follow you here. ..When you say “if you do it right”, how might you do it wrong though?

 

breaking the nexus, parking in an offset account, creating a mixed loan etc All the usual rules of deductibility apply

 

This may not work cleanly as it will leave a blended loan. Lets assume two properties and two loans of $1,000. Then one comes up high on valn and other is low. So you have two new loan offers as :

Property 1 : $800
Property 2 : $1200
Loan 2 is now blended as it reflects $1k for property 2 and $200K for refinance of property 1. This means Loan 2 must be apportioned 16.67% for property one and 83.33% for property 2. late issues could afrise eg You sell property 2. Lender may discharge the full loan. You will lose some deductbility to prperty 1 if you dont refinance that

May be better if lender allows to have three new loans. That way the refiannce shortfall on property one can be quarantined and isnt blended with property 2.