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Splitting PPOR loan for IP deposit

Discussion in 'Accounting & Tax' started by raincoat, 10th Oct, 2016.

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  1. raincoat

    raincoat New Member

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    Hi there,

    I am fairly new at property investing, and have a question on setting up loans.

    I have a PPOR and one IP. I am looking to purchase a second IP using equity from my PPOR.

    My plan is to increase my current PPOR loan by $100k (still under 80% LVR and will open a new account for the split loan). I also have cash available in my offset account.

    My question revolves around how to maximise the amount of money I can use for investment purposes, without risking contaminating either loan. I have read lots about this and gotten advise from my accountant, but am still a bit confused!

    Can I use $30 in savings to pay down my PPOR loan, to allow the new, split loan to be $130k? This would be a $100k increase in loan value but would allow more 'deductible' money available. I would leave the $130k sitting as a redraw until I am ready to purchase. Or is there a smarter way to restructure?

    Thank you in advance for any assistance!
    Rebecca
     
  2. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Dont feel alone as it takes a while for the "penny to drop" due to old mindsets still in your head that will work them selves out eventually as you gain experience and therefore confidence.

    This ^^^^^ is correct and you are on the right track.

    Just make sure you keep it in a separate loan split and dont use the funds for anything else other than investment purposes.
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Hi Rebecca

    That sounds okay but if the loan is currently P and I payments you may have issues - this kind of thing can be risky to do DIY.

    If it's IO it's abut more straight forward.

    Which lender are you with?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Depends on the current LVR.

    Work it out like this;

    (Value x 80%) - current loans

    example

    $500,000 property with a $250,000 loan

    500,000 x 80% = $400,000 - this is the max loan without LMI

    But you already have borrowed $250,000 against this property so:

    $400,000 - $250,000 = $150,000 - this is the maximum increase in borrowings against this property without incurring LMI.
     
  5. S0805

    S0805 Well-Known Member

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    double check with your lender. some lenders will close the loan account if redraw amount is same as outstanding loan.
     
  6. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Yep - you're on the right track.

    If you haven't already had a valuation done - see if your lender will provide an upfront one.

    Cheers

    Jamie
     
  7. raincoat

    raincoat New Member

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    Thanks everyone for your advice! While I know I have some work to do to ensure it is all set up correctly I'm glad this is not too far out of left field :)

    Jess- my current PPOR loan is P&I with ING

    Thanks again
    Rebecca