Refinance from private loan

Discussion in 'Loans & Mortgage Brokers' started by kinkyquokka, 5th Nov, 2020.

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  1. kinkyquokka

    kinkyquokka New Member

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    Question for the brains trust here ...

    Due to COVID & being stuck overseas, I'm likely to have a very low income in my name this FY - which will likely smash my serviceability - but I'm looking to buy a property as soon as I can get back to Oz.

    I've got cash to buy a property outright but want to use this money elsewhere in 12-24 months. So I was thinking of lending money to a company I control and causing that company lend the money back to me (on Div 7A terms) while taking a registered mortgage over the property.

    Then, in 12-24 months when I'm receiving income again, I'd like to refinance with a regular bank/lender. So my question is ... will a bank refinance @ 80% LVR on a loan & mortgage held by an associated entity (assuming normal serviceability is met)? Are there any obvious pitfalls in this strategy?

    Thanks in advance
     
  2. Terry_w

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

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    yes potentially
    but you would likely have issues around deductibility of interest.
     
  3. kinkyquokka

    kinkyquokka New Member

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    Thanks Terry

    > but you would likely have issues around deductibility of interest.

    Could you clarify this pls? If the loan was for an investment property that was rented out, I would have thought that deductibility would have be the same regardless of the lender - that I could claim interest expenses & the company would pax tax on the interest income (for a net $0).
     
  4. Terry_w

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

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    but you are borrowing your own money. Part IVA
     
  5. kinkyquokka

    kinkyquokka New Member

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    Thanks again.
     
    Terry_w likes this.
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    A primary concern for most lenders with refi of private loans is these can be a high risk from an FTRA Perspective.

    Examples are 770 million good reasons for CBA and more than a billion for WBC

    ta
    rolf