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PPOR while Reno then IP

Discussion in 'Property Finance' started by PJ1, 7th Oct, 2015.

  1. PJ1

    PJ1 Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    72
    Location:
    NSW
    Hello PCers
    We are relative newbies to the IP lifestyle where our plan at this stage is buy under value repair and hold long term.We have completed a huge hands on reno to our one and only IP which has been doing well for the past 12 months.
    Call me a crazy but I enjoyed the work and it has been worth while financially so I was thinking about repeating the process but upsizing this time.
    I have found several houses in need of plenty of love but a larger $ project would require us to live in while renovating and rent our PPOR to assist with costs.

    Can anyone advise how I would go about structuring finance for a house that we would live in for 1 or at a push 2 years while we fix it up to rent out. I'm worried how the banks will view this plan in light of APRA restrictions .
     
  2. Greyghost

    Greyghost Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,262
    Location:
    Melbourne
    I would be applying for a loan just as your PPR.
    We all "may" rent out our PPR in the future, circumstances change.

    Plus if you enter the purchase under IP then you will be subject to higher stamp duty etc.

    I think this is a simple home purchase..
    You may wish to get finance as your PPR and request:
    5 year interest only period
    Offset account

    Make repayments into the offset account as if the loan was principle and interest, thus reducing your non deductible interest while living in it, then utilise the additional funds in offset when it comes time to purchase your new home, then your original loan will form deductible interest, but you have not reduced the principle on it - maximising your deductible debt and applied your offset funds towards your new home which is non deductible .
    Something like this.. I have not had my morning coffee yet so I apologise for not being coherent lol
     
    Dale, PJ1 and juzzy like this.
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,781
    Location:
    Perth WA
    I agree - if you are going to live in it, it's home and a PPOR loan is appropriate.

    Banks won't really care what your plan for 2 years in the future is, people move house all the time :)
     
    PJ1, juzzy and Propertunity like this.
  4. PJ1

    PJ1 Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    72
    Location:
    NSW
    Thanks Grey and Jess.
    I'm new to investing and didn't want to get into a pickle further down the IP journey.
    I have put in an offer, and should hear back later today. :)
     
  5. Dale

    Dale Member

    Joined:
    28th Sep, 2015
    Posts:
    17
    Location:
    Brisbane
    Also considering this strategy.

    How did it go? did they accept your offer?
     
  6. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    That's not crazy, it can be a rewarding experience, seeing the results of your work. When it all goes to plan of course ;)
     
  7. PJ1

    PJ1 Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    72
    Location:
    NSW
    Missed the first one but had an offer accepted on another property, we should sign tomorrow.
    I dont want to say much until it settles.
    It is going to be a different rebuild to our last two, I'll need to consider bringing it up to a standard similar to the surrounding properties which will require some imagination to save funds.