Master Limits

Ideally the new split would be better as IO as the additional cash flow can then be used to pay down the P&I non-deductible debt faster...

 

Agree, unless that triggers a more rigorous assessment which may or may not be desirable depending on circumstances.

Where there's no non deductable debt, and investing in equities it's a good way to get P&I rates whilst keeping a constant total.loan amount and growing your total asset base.

 

THe strategy of using interest only on a PI loan could potentially work well with the master limit. Borrow extra, park it in a new offset and get the relevant loan paid out of this offset account with the interest paid each month into that offset.

Needs further thought.

 

@Terry_w even simpler, leave the extra in the loan, cancel repayment direct debit, and simply pay interest directly into the loan each month, and the bank will reduce the redraw amount inline with principal repayments. No need to risk borrowed funds sitting in an offset account.

 

I guess the main issue I have had is that IO loans with AMP are 5yr term and then P&I. So the LOC (being a 10 yr term) works a bit better for me. Even though the rate is slightly higher...

 

You can get a master limit for 10 years. Then recycle principal per my previous post. All at P&I rates

 

Famous last words.....eg St George set us up on something similar.....now no longer want expats on this loan type and refusing to allow additional loan or moving variable to fixed loans etc.

 

Sorry Chris can you elaborate further? I couldn't find details in a previous post.
All the splitting can be created/assessed once you have the AMP P/O loan. That will be my first step to move over to AMP

 

Hi @ToddP. I was referring to this post Master Limits

 

Does this mean that, rather than having to add a new loan split, someone can just increase one of the existing sub accounts loan values? ie. If someone pays down their P&I non-deductible PPoR debt by $20K, they can just increase their investment IO loan sub account by $20K (as long as the total debt remains the value of the master limit amount?)

 

u can decease one and increase another - for example

 

Can an injection of cash funds (eg. tax refund, work bonus etc) be used as a deposit to help reduce the balance of a shares-related sub-account, then these funds be re-withdrawn from the loan, now making the interest now tax deductible?

Scenario example - Fred has a loan with a limit of $30K - this was taken out under the Master Limit facility, and these funds have been used exclusively to purchase shares. So far he has spent $29K on shares (the interest on this is now tax deductible) and he now only has $1K left available to buy new shares.

At Christmas, his boss gave him a $10K bonus (lucky Fred!) - rather than leaving the $10K sitting in his savings/offset account against his PPoR, he's thinking of paying this $10K into his loan account. This means that he now will have $11K ($1K + $10K) available to draw down and buy more shares, the interest on this $11K loan is tax deductible, and the dividends on the shares are at a higher interest rate than the rate he's attracting in the offset account (making it a better place to put his $10K).

Is Fred's thinking 'correct'? flawed? sound?

 

If Fred borrows to buy shares the interest would be deductible if the shares pay dividends.
If he pays down the PPOR loan and Redraws this is borrowing to invest = and debt recycling.
But Fred would be wise to split the loan before borrowing or borrow by increasing the existing $30k loan