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Is this setup okay?

Discussion in 'Property Finance' started by Otie, 27th Apr, 2016.

  1. Otie

    Otie Well-Known Member

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    I am about to finalise loan application (already have the conditional approval for the refinance)

    Before I put it all through I want to make sure it is structured as best it can be for my situation.

    I have a 263k PPOR loan, and am refinancing to release equity for a pool for my PPOR, and a deposit for an IP.
    Pool will be 48k.

    The bank has said they will increase my PPOR loan to 440k to allow for this.
    The refinance will be at 80%LVR for both my PPOR and IP loans.

    I asked for the PPOR loan to be split so that the deposit for the IP remains separate and won't get contaminate each other.
    The bank said this would be okay, but at the end I would only have the two loans ,I think they mean the equity release from my PPOR for the deposit for the IP will eventually be combined into the IP loan itself- does this sound right?
    Also is 80LVR ok?

    They have said we can spend up to 450k purchase price for the IP

    Is there anything else I need to set it up with?
    Also for sevicability we both need to be On the mortgage- is there any reason we should or shouldn't both be on the title of our PPOR and IP?

    Thank you!
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    What did they value the PPOR at? Presumably 550k if they're allowing you to go to 440k x 80%?

    So the PPOR (non deductible portion) can go up to 311k (being 263k + 48k) and the investing portion which you'll use as a deposit will be the 129k (being 440k - 311k). This is what you use for deposit and related costs on the new IP. Both of these loans are secured against the PPOR.

    Ensure when you buy an IP, you get a seperate loan for that that is secured by that new property only, for 80-90% of it's value (using the one in previous paragraph as deposit).

    Both names on PPOR is fine. Need to have more of a think about whether both names should go on IP - usually comes down to land tax as the main thought process, but tax bracket or asset protection could be reasons too. Note that names on title and names on mortgage are 2 different things.
     
  3. Otie

    Otie Well-Known Member

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    Yes Val came back at 550k
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sounds right for the bank, but this will cost you money.



    Split it into 2 loans.

    One for the non-deductible debt = existing loan relating to the house and the pool

    One for the investment use



    And then get a third loan for the investment purchase using the investment split above for the deposit and costs.



    As for title, yes there are many reasons, see Tax Tip 21: Tax Advantages of Buying property in 1 name only
     
  5. Otie

    Otie Well-Known Member

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    Thanks