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Loan for ppor

Discussion in 'Property Finance' started by Valentino, 23rd Aug, 2016.

  1. Valentino

    Valentino Active Member

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    Can we get an equity loan from an IP to buy a PPOR or can we only get it for an IP? If the latter, how long should it be an IP before one moves in?

    For eg, can we borrow 30k and it sits in an offset as a buffer? We can afford the loan without it (we think) but we would have no cash buffer,p. We are cautious and know unexpected costs can happen. so we're thinking, esp as interest rates are low, just to have that equity loan as a cash buffer ? The IP is cf positive by $2000 pa approx.
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    From A lender Point of view, getting equity out for PPOR use is no issue if it services etc

    Tax implications would need to be considered

    ta
    rolf
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    It's no trouble to get equity out to put toward a PPOR - you'll want to create a new split to reflect the different purpose, but it's definitely possible.

    It's also a good idea to access equity while it's there and have it sitting ready as a buffer - wise planning in my opinion.
     
    Colin Rice likes this.
  4. Valentino

    Valentino Active Member

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    Thanks Rolf.
    When u say "tax implications", do u mean, keep it as a separate loan; and that its non tax deductible?

    Any other implications?

    And can it be an IO loan of for a PPOR or does it have to be P&i?


    Ta


    y tax implications
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Dont mix loans.
    And you wont be able to claim the interest if borrowed money used for private purposes.
     
  6. Obsidian

    Obsidian Active Member

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    Yes. The ATO looks at the purpose of the loan, not where it came from. In this case you would be moving money from the IP, to use for personal use (PPOR), so that portion of the loan would then be non-tax deductible. Seperate loans for ease of accounting. As the portion used for PPOR is then non-tax deductible, all future interest deductions, etc would need to be percentage split (say $20000, 40% non-deductible ($8000) 60% deductible ($12000)). Easier to keep track with seperate loans, rather then mixing loan.
     
  7. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    If you have equity in other properties as well as this IP, its a good practice to release to 80 or 90% depending on goals and serviceability.

    Get it while you can cause when you actually really need it you may not qualify.
     
  8. Sonamic

    Sonamic Well-Known Member

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    So here's a curly one. I accessed Equity from IP 1 to build IP 2&3. IP 3 didn't proceed. So there was 40k surplus from IP 1's Equity Release after completion of IP 2. These excess funds now sit in IP 2's offset paying for all associated Expenses for IP 1&2.

    Mixed purpose Loan?
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    yes
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Are the costs above including Interest ?



    ta
    rolf
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Has any cash at all gone into that offset account holding the borrowed funds? Including rent?
     
  12. Sonamic

    Sonamic Well-Known Member

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    Yes. IP 2 holds the offset containing the funds. IO Repayments for IP 2 ONLY and running costs for IP 1&2 come out of this offset. IP 1 IO Repayments come out of a seperate banks account as I have not yet linked it to come out of IP 2's offset.

    Surplus funds could not be returned to IP 1 from whence they originated because that Lender has a No Extra Payment policy for their IO IP Loans.

    Yes. Rent from IP 1 only goes into IP 2 offset. IP 2 rent goes into a personal savings account. The proverbial drop of urine is mixed in the cup of tea yes?

    This was all set up pre PC days and I was quite the newb on the final weeks of SS. So currently the boat is adrift on oily waters and I wish to steer what is left towards clear seas.
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Contaminated - drop of tea in a bucket of urine!
     
  14. Sonamic

    Sonamic Well-Known Member

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    Ok. Thanks for that.

    Lucky it's only 40k and not a deal breaker. :D