New Home Loan Structure

Discussion in 'Loans & Mortgage Brokers' started by Nick007, 14th Jan, 2022.

Join Australia's most dynamic and respected property investment community
Tags:
  1. Nick007

    Nick007 New Member

    Joined:
    14th Jan, 2022
    Posts:
    1
    Location:
    Sydney
    Hi,

    Just seeking some advice on structure and what I should do for better tax outcomes etc.

    The place i'm in the process of buying is for an investment and maybe move into after several years if I get married have kids etc - 4 bedroom 2 story house, very well presented home.

    Details:
    Price: $1m
    Borrowing: $800k
    Available Deposit: $450k ($200k going towards deposit).
    (Note figures are rough, I've calculated for legal and other fees separately).
    Salary: $100k before tax (Single income).

    Rental return is pretty good, I'll be positively geared from year 1/2. The loan unfortunately does not have an offset account, hence it's at a reduced rate, but does provide unlimited redraw. I'm financially prudent and don't look at redrawing for cars etc, just need it for family emergencies.

    I'm going to be parking my deposit into the loan to lower repayments and try put something aside where possible for future investments.

    Any tax implications without an offset vs redraw? Downsides, upsides?
    Keen to hear thoughts!
     
    Nick007, 14th Jan, 2022
    #1
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,343
    Location:
    Australia
    What if you dont move into this property but want to buy somewhere else for ppor?

    thats where the redraw and not an offset will cost you if you put extra money ‘into the loan’ (ie redraws are new borrowing). Likely more than the interest you are saving (which is probably tax deductible now).
     
    Trainee, 14th Jan, 2022
    #2
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,649
    Location:
    Gold Coast (Australia Wide)
    Redraw v offset

    Any redraw that you make from the loan for non investment will contaminate the loan for tax purposes as you would be aware, im not a tax guy though

    Perhaps look at splitting your buffer off before you redraw to isolate the loan part that is now fully drawn, and leave the redraw split with a small balance.

    Is the loan PI or iO ?

    ta
    rolf
     
    Rolf Latham, 15th Jan, 2022
    #3
  4. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,685
    Location:
    Perth WA + Buderim Qld
    So many downsides! ;)

    Redraw is very rarely the right answer for an investment property loan. Using an investment savvy broker from this forum will be a valuable educational experience for you, and will possibly change your entire strategy - 'normal' banking wisdom (ie, lowest rate at all costs) is not often appropriate when investing and building property portfolios.
     
    Jess Peletier, 15th Jan, 2022
    #4
  5. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

    Joined:
    23rd Aug, 2015
    Posts:
    1,574
    Location:
    Bella Vista
    Most likely you will be drawing some funds out to use, irrespective of how much, hence what Rolf notes is that you will unintentionally contaminate the loan.

    It's why we always say..rate isn't the most important thing.
     
    Tony Xia, 15th Jan, 2022
    #5
  6. Morgs

    Morgs Well-Known Member Business Member

    Joined:
    7th Dec, 2017
    Posts:
    1,812
    Location:
    Sydney NSW
    Hey Nick, it sounds like it is an investment property. Are you thinking about buying an owner occupier in the future? If so, I'd definitely look at an offset product for this purchase.

    There are plenty of lenders who don't load the rates for an offset product so you'll still be able to find an economical solution.
     
    Morgs, 15th Jan, 2022
    #6
Maximum Deductions - Washington Brown Depreciation