Selling ppor and paying off splits

Discussion in 'Loans & Mortgage Brokers' started by freyja, 21st Nov, 2016.

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  1. freyja

    freyja Well-Known Member

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    We're buying a house that will be an IP for short time before we knock down and rebuild a new PPOR on it. Before the knock down, we plan to sell our current PPOR. The thing is, it has splits that are currently deductible that we used for deposits for IPs.

    Is there a way to switch these splits to another security and keep the deductibility?

    We are borrowing 80% on the new property so adding the splits to that loan will incur LMI if we do it now.

    Is this a case of sucking it up and paying out the IP deposit debt?
     
    freyja, 21st Nov, 2016
    #1
  2. albanga

    albanga Well-Known Member

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    @Terry_w wrote a great post on this very thing. You can use a term deposit as security until you have your new PPOR and then switch it back to that.

    E.G - Sell and use profits to pay out non deductible loan. Other funds then go into a term deposit and secure the deductible loans. Get your new PPOR and switch the security from the term deposit back to the PPOR.

    I have not personally done this but sounds fairly straightforward
     
    albanga, 21st Nov, 2016
    #2
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    We do this a bunch

    I would say its "straightforward" for many but not always - more than one lender makes a port "credit critical", and if there is a long time lag between the sale and the purchase settlement.........it can be very costly because you are still paying the full mortgage thats secured, and getting only a small return on the TD which is often also taxed, there is a tax dedn question for someone to answer :)

    The best one we are navigating right now is a port where we have sold a PPOR in NSW, bought a new PPOR in QLD, and an IP in VIC, and it all needs to settle same day............ to preserve LMI

    Lots of learnings

    ta
    rolf
     
    Rolf Latham, 21st Nov, 2016
    #3
  4. Terry_w

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

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    Terry_w, 21st Nov, 2016
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    albanga likes this.
  5. Corey Batt

    Corey Batt Well-Known Member

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    You will need to either port the splits to another security OR secure against a term deposit with the lender.

    Sounds easy until reality sets in - where it's a balance of:

    • does the lender allow porting of the facility
    • do you have a property to port the loan to with sufficient equity
    • do you have a property to port the loan to with the same lender
    • do you have a property to port the loan to with the exact same ownership as the current property (ie joint ownership, just in husbands name, in a trust etc)
    • Does the lender allow you to secure the loan against a term deposit
    • Can you find a property to purchase prior to the lenders cutoff for the term deposit
    As always, in theory there are nice neat solutions to all problems - but then life gets in the way!
     
    Corey Batt, 21st Nov, 2016
    #5
  6. Terry_w

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

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    Consider related party loans as well
     
    Terry_w, 21st Nov, 2016
    #6