Hi all, I'm new to the PP investment world, I'm doing my research to plan out a proper loan structure for my first IP, and need some advice from you guys My situation: - My wife and I bought a PPOR last year under both of our names. The loan was 515k split into a fixed rate account 260K and variable rate acc 255K, the variable account has redraw facility only. We then received a gift from our parents and put it straight into the variable account. We have redrawn from it many many times for personal purposes. - As of now, the balance is Fixed rate acc: 248k Variable rate acc: 125k + 120k redrawable. - The estimated house value at the moment is about 800k We now want to maximize the loan to 80% which is about 640k to release some equity to use for the IP. We are planning to pay that 120k off to the bank to bring down the balance to 373k? refinance it to get - Loan A: 373k, security is the PPOR - Loan B: 267k (640-373) as a LOC, security is the PPOR - this will be used for IP deposit + stamp duty + other related expenses only. - And when we buy the IP, we'll apply for a loan C, secured by the IP itself I'm seeking some feedbacks for this plan. Is there any other way to make it better? This is our first investment, so just want to make it good from the beginning. Thanks,
Hey Mlana, That sounds fine on the face of it. I wouldn't get a LOC though, they're expensive and the risks tend to outweigh the benefits. Just bear in mind that if your PPOR ever becomes an investment, you'll need to get some accounting advice due to the redrawing for personal use. In the future, an offset will give you more flexibility with less risk of stuffing up your deductions. There's lots of good brokers on the forum who can help you set this up - it's always good to know you're not making rookie errors when dealing direct with the bank.
couple of quick questions pls when does the fixed rate expire ? will this be your forever home, or will it become an IP one day ? ta rolf
@Jess Peletier thanks for your advice, instead of a LOC, I’m thinking about getting an IO loan with a offset acc attachted. How do you think?
@Rolf Latham The fixed rate expire in 11 months And yes, it will become an IP one day, but I’m not sure when.
Perhaps have a chat to your accountant about the future impacts of the above and this bit below. The 373 may end up being a contaminated loan? ta rolf the variable account has redraw facility only. We then received a gift from our parents and put it straight into the variable account. We have redrawn from it many many times for personal purposes.
