ppor finish loan from offset

Discussion in 'Loans & Mortgage Brokers' started by Deck, 1st Jun, 2018.

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  1. Deck

    Deck Well-Known Member

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    Hi guys,

    Concerning my PPOR, i have enough on the offset to pay off the loan (IO for 5 more years), I dont think we will move anytime soon as the house is so conveniently located (very close to my kids' school).

    It sound stupid but psychologically i would be more comfortable having my PPOR paid off but ofcourse I setup this offset to be able to deduct interests once I buy another ppor and this one becomes an IP.

    Is there a solution to pay off the loan today but still be able to still deduct interest in full later on (new borrowing ?).Thank you
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It depends what you mean. If you keep the loan open you could potentially redraw and use those funds to invest and then claim the interest, but if you redraw and then rent this property out the funds won't be deductible unless you have used them to invest elsewhere.

    This may be of interest
    Strategy: 11 Strategies for when you move out of the PPOR and keep it Strategy: 11 Strategies for when you move out of the PPOR and keep it
     
    chylld likes this.
  3. John_S

    John_S Mortgage Broker

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    You could close the loan now, then in future take out a brand new investment loan to use as deposit for an IP purchase.

    However you may get a lower interest rate if you get a cash out loan now with your current lender, as the total lending balance (including current fully offset loan) will be higher than if you just took out a small deposit loan against the unencumbered security
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Plus owner occupied rates v investment rates if you took out a new loan.
     
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Yep - you could do an equity release against your ppor later if you like.

    Only minor issue is that the rates will prob be slightly higher because the loan will be coded as “investment” rather than owner occ (your current loan).

    For what it’s worth - I get the psychological aspect. Personally -if you have no intentions of moving, etc then I’d pay it off, sit back and enjoy a beer. Well done! Paying off the ppor is an awesome achievement.

    Cheers

    Jamis
     
  6. Corey Batt

    Corey Batt Well-Known Member

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    The fact that you've said you'll buy another PPOR in the future and retain this as an IP - i'd leave it as is. Whilst that psychological factor is there - you don't want to make what is a substantial financial mistake which will have an ongoing cost to you for sometime.

    If you otherwise think you will not retain the PPOR as an IP - you can clear the debt. In reality however, the cost of keeping the account as a backup in case of any changes to your plans, i'd keep it sitting there.
     
  7. Deck

    Deck Well-Known Member

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    Thank you guys, I will leave has it is (unless things go south and Westpac is in need of a bail-in)
     
  8. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Yep, leave as is.

    In regards to the psychological factor, that's all it is, in your head, the net result is the same except you get to deduct all the interest once converted to IP due to preserving the principal.

    A subtle mindset shift is all it takes.