Loan structure if buyin PPOR that may convert to IP

If I want to buy a PPOR but may in year to come find an alternative PPOR and convert the current PPOR to an IP what is the best loan structure in the case so that I can draw out the equity to place into the new PPOR as it is non deductible?

IO vs PI
Fixed vs variable
Offset facility?

 

If the property will 100% turn to an Inv in the short run then you would want to do it as IO to maintain its full tax deductions.

But when you find a new PPOR you'll restructure the original PPOR to an investment interest only to obtain the lower IO rate, as IO for PPOR loans are higher.

If there is usuable equity on the property in a year's time then you can draw it out, but that portion of the loan should be P&I since its for owner occupied use.

 

... with an Offset to hold any/all spare cash.

Ideally this Offset balance should increase each and every month. As a minimum, the increase should equal the principal component of the loan as if it was P&I. In other words, you are mimicking a P&I loan but the principle component is going into the Offset, not to the bank.

When the time comes to buy the next PPOR, one can withdraw all the Offset funds for the purchase and the interest on those funds is tax deductible as the first loan is now against an IP.

 

Better to understand what the difference is between saving money into an offset v paying money directly into the loan.

 

can you borrow 105%. Ideally don't pay any down. Offset

 

I just spoke to my accountant about P and I vs fixed.
He told me if I was to convert the purchase (PPOR) into IP within say 5 years, then I have to consider the higher interest cost on the whole loan for the 5 years (IO being higher) vs the principal contributed over 5 years which can be quite minimal and won't be deductible throughout the life of the loan as an IP. He reckons because the higher interest on an IO loan is on 100% of the loan vs sacrificing a small portion of principal paid on a lower interest rate, I would still be ahead. I believe the different in P and I and IO is about 0.5% currently?
Assume loan balance where interest is payable is 1M
What are peoples thoughts on this?

 

Well it is, i was to know if i got 2 structures to choose from, which structure would allow me to be further forward. Naturally the asset selection will determine the returns in the end but the structure of the mortgage is something we cna fully control and therefore should optimise.