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Split loan for PPOR and investment

Discussion in 'Property Finance' started by alexz1011, 7th Jul, 2016.

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  1. alexz1011

    alexz1011 New Member

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    Hi all, a newbie here. I've been offered by my broker to refinance and restructure my current loans (1 PPOR and 1 investment) into a single loan split into PPOR and investment.

    Is there any pitfalls (now and later) I should be aware of with this strategy? Thanks!
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    What's it secured to? Will you hold a title unencumbered once this is done?

    If the securities will be crossed, it's a bad idea. Run away! :)
     
  3. Digitalism

    Digitalism Active Member

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    Keep your current loan structure.

    Sounds like your broker is trying to cross collateralize.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Do you mean joining both loans?

    If so, that is a terrible idea.
     
  5. alexz1011

    alexz1011 New Member

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    Yes, joining both loans. He didn't actually explain what it is secured to. Is the only option with a split loan security is to cross collateralize?

    Thanks for the replies. I actually know cross collateral is a bad idea, but being unfamiliar with a split loan, it didn't click on me ;)

    Alright, thanks for the replies. I will reject the idea of split loan then. Thanks! :)
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Now think that through and consider what the tax consequences could be. It is cross collaterlising - but worse.

    You can retain the loans without the need to cross.
     
  7. Alex Straker

    Alex Straker Financial Life Coach Business Member

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    Best to maintain separation of security where possible. You can still have a split loan against a single property as security (without cross securing) provided the desired limits on the splits fit within the LVR of your chosen security. This type of loan can be highly effective for debt recycling and eliminating non-deductible debt quickly but requires a good understanding of how to forward plan and structure cash flows..
     
  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Sounds like terrible advice.

    Did they explain the rationale behind it?

    Cheers

    Jamie
     
  9. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    You've got two loans that have different purposes and the broker wants to combine the two into a single loan. How will you be able to determine what money is used for what purpose? This is a horrible idea that will cost you money.
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    rate I bet