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Loan money

Discussion in 'Property Finance' started by Set81, 3rd Jun, 2016.

  1. Set81

    Set81 Active Member Premium Member

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    Need some advice please .
    I'm currently purchasing a IP , after all purchasing cost will add up to around $255K for the property , the loan is for $280K , I have a personal loan owing $12K and a credit card at $2K should I pay those off with the extra $25K from the IP loan ? Or place it straight back on the IP loan ?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If you borrowed to pay a private as well as an investment expense you would end up with a mixed purpose loan and a tax problem.

    How are you borrowing more than the property is worth?
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    I take it you're pre-approved for $280k - this does not mean the bank will lend you that much for your purchase, unless you have more than one security - ie, 2 houses securing the loan.

    The most the bank will lend on one security in most cases is 95% of the value, and this varies dramatically between lenders.
     
    Perthguy likes this.
  4. EN710

    EN710 Well-Known Member

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    Did you extract equity? How do you borrow 280K if the total property cost is $255K?
     
  5. Set81

    Set81 Active Member Premium Member

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    I've been approved for $380K using equity in another property , but took a $280K loan to putt he rest back into the loan as a buffer or to pay the personal debt maybe if it's possible
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    If you have more than property it's definitely possible, you just need to make sure it's structured correctly so your tax deductions aren't compromised.

    Having the two properties both as security, and one big loan with multiple purposes is the worst way to do it - you may not be able to claim deduction for the interest on your IP, and it's high risk using both properties to secure it.
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    did you cross collateralise?
     
  8. Set81

    Set81 Active Member Premium Member

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    I've used equity in my parents property , they are on the loan but not as owner of IPs
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Ok, so cross collateralised with the parents property. So you have one big loan with no splits? In that case I would just pay the excess back into the loan.
     
  10. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Ah, that makes sense.

    You could pay off your CC and PL with your parents house, but please make sure you pay them back asap.

    I would make the loan in three splits, one with 80% on IO, the other 2 (one for deposit costs, the other for personal debt) on P&I and pay down those splits asap. Then you can release your parents security and do it without risking their home.

    If you can't split it, just use the funds for IP only.
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    That would create a mixed purpose loan, If I have understood the set up correctly.
     
  12. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Edited - didn't explain fully in my rush. :)
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I've assumed it is one big loan, secured by 2 properties.

    So borrowing extra and paying for private expenses would relate to 2 purposes.

    If it was 2 splits the second split could be used for a different purpose.
     
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  14. Set81

    Set81 Active Member Premium Member

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    I do also have around $50K cash for emergencies and I put $10K deposit for the property the bank said I could pay myself back that $10K but I thought that isn't really possible
     
  15. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Of course u can pay back the 10 k from the loan, but unless the banker is a tax agent, their answer relates to the banking side of the deal not the accounting side.

    Ta
    Rolf
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    From a legal point of view:
    Tax Tip 5: Reimbursing yourself - Impossible Tax Tip 5: Reimbursing yourself - Impossible