PPOR (future IP) - Planning for the future

Discussion in 'Loans & Mortgage Brokers' started by Talicska, 12th Dec, 2019.

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  1. Talicska

    Talicska Member

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    INFO:
    • FHB looking to purchase PPOR with partner, live in for a couple of year before making it an IP and buying new PPOR.
    • I have engaged a mortgage broker. Currently have a $250k deposit, looking to purchase something around $600k.
    Broker has suggested that we used Advantedge (NAB rebrand?). She says that the redraw facility that it provide is the same as offset. However, a lot of posts on here are saying that an offset account is the way to go because it keeps it "your" money not the banks. (I suggested ING, any good?)

    Any advice on what kind of loan setup I should be looking for if my goal is to "hop" from PPOR to PPOR, whilst giving them a quick touch up and holding them as an IP?

    I really appreciate any suggest, or links to articles you can provide. Always looking to expand my knowledge - Cheers!
     
  2. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Hi and welcome to the forum! :)

    You need a broker that is clear on investment lending - you've been given terrible advice by this one!

    Please engage a broker from this forum - they'll be able to hep you set it up correctly. You already know more than your current broker about investment lending.

    You'll also want someone who can help you make the most of your deposit, so you can still be correctly structured after the next two or three purchases. :)
     
  3. Terry_w

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

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    Borrow 105% if you can. Get an offset account and don't pay any extra off the loan. Indeally IO but will be difficult to get and you want to consider the rate difference.
     
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  4. Trainee

    Trainee Well-Known Member

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    The key is that redrawing is a new loan, while using offset money is not.

    good that you noticed something was wrong, but you need a better broker.
     
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  5. Talicska

    Talicska Member

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    Thanks Terry, are you able to elaborate/link some reading material that explains the reasoning behind this choice further?
     
  6. Terry_w

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

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    Tax Tip 61: How to borrow 105% on your first purchase Tax Tip 61: How to borrow 105% on your first purchase

    The idea is to maintain a high loan that relates to the purchase of the property as the interest on this will be deducitble once you move out and rent the property.

    Tax Tip 87: Moving out of the Main Residence and Interest Tax Tip 87: Moving out of the Main Residence and Interest

    Tax Tip 129: Deductibility of Loans when later renting out your main residence. https://propertychat.com.au/community/threads/tax-tip-129-deductibility-of-loans-when-later-renting-out-your-main-residence.11043/
     
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  7. Talicska

    Talicska Member

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    Mate, you are a wealth of knowledge! My only other question before getting in and reading what you have linked.

    My partner and I currently earn about $120k p.a. combined (we are young and have good jobs so plenty of room to grow this figure). We arent earning a "huge" amount of money, so are the tax incentives worth the large (see 105%) leverage? Are the loan/tax structures usually suggested on here, really only effective for people with higher incomes in need of larger deductions?

    Please correct me if I am wrong, just looking for more insight. Thanks again!
     
  8. thatbum

    thatbum Well-Known Member

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    In short, "no".
     
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  9. Terry_w

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

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    Just think for every $10,000 you cannot deduct, the interest on this at 3.5% would be $350 per year in lost tax deductions. $3,500 per year per $100,000 of loan that you either didn't take out or paid down.
     
  10. Trainee

    Trainee Well-Known Member

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    Say cash 250k, buying 600k property. Assume no costs etc

    option 1: loan 350.

    option 2: loan 600, 250k in offset.

    Done right when you move to another ppor, interest will be deductible on 350k v 600k. As long as your tax rate is more than zero, you benefit from option 2 v option 1.

    sure you benefit more if you are on a higher tax rate, but even at the lower marginal rate you still benefit.

    option3 is where over 10 years you happily pay off the loan completely and then move ppor, and nothing is deductible. More common than you think.
     
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