Terryw’s Ideal Loan Structure

1. Increase loan C to pay off loan B - without closing it, allowing it to be redrawn for the next deposit.

2. yes,

 

Hey terry.

Regarding what @starter was saying. If I was to cashout for investment purposes, and get the money deposited into my everyday offset account.. would I pay that cashed out money back into the loan and redraw it into a newly made account for deposit, conveyancer fees and settlement when I've found a property?


I also mentioned to my accountant about how I paid back my loan so I don't contaminate 'borrowed and non borrowed' money for tax purposes until I decide to purchase another IP, and he said why don't I just put everything into the offset.

I'm getting the impression he does not quiet know what I'm trying to tell him. (Which is what I read on your tax tip) How can I word it to him so that he'll understand ?

 

All the answers are in my tax tips ebook, or
Tax Tip 1: Parking borrowed money in an offset account Tax Tip 1: Parking borrowed money in an offset account


there is even a webinar explaining on my website.

 

having rent paid into offset on main ppor would have constant withdraws to service the IP loan. this doesnt matter?

 

rent is cash so it doesn't matter where it is deposited - in terms of mixing loans. Redrawing from an offset is not borrowing money.

 

When we had our offset we only had 2 accounts, the 400k PPOR mortgage and a 100% linked everyday savings account where our 2 pays went. Most of the time I paid extra money directly ontop of the ppor loan but sometimes took it back out for random reasons. Do i need to go back to this point?

 

In that case you have a mixed loan if you redrew from the loan. Seek specific tax advice.

 

damn, that is 10 years of statements probably just wont bother claiming interest then if we eventually rent ppor out.

So what would you do moving forward, keep saving into offset or actually pay main ppor down?

 

It would depend on the situation. Generally save into an offset account and the consider whether to pay down the loan at periodical intervals. Might be worth doing for debt recycling purposes.

 

For those who have implemented Terry_w's structure, did you find that there were only a limited number of lenders who were willing to provide the newly split Loan B as IO secured by PPOR? I have been told by one lender that most lenders would not provide IO loan secured by PPOR due to increased pressure/restrictions by regulators, which flow down.

Also, have many people been able to get a IO loan which functions like a LOC (and if so, which lenders), or have most of you had to get the newly split Loan B as a LOC then seek to convert to IO? Is the process relatively simple to get this converted?

 

This was written about 5 years ago when things were different, these days you might have to go PI on the new split.

I would suggest avoiding LOC where possible

 

Hi Terry, thanks for sharing these great tips!!!

Just wanted to ask, regarding the debt consolidation part where 100K from Loan B is transfered to the IP's Loan C by increasing it from 320K to $420K, will the interest on this entire $420K loan be tax deductable ?

Given the 'purpose' of Loan C's 100K top up is to 'pay down' LoanB, will the interest on this $100K portion remain a legit tax deduction according to the ATO ?

I contemplated doing to this to one of my IPs in order to consolidate and tidy up my investment loans but abit worried about potentially loosing the tax deductability on the interest.

Thanks vey much

 

If you borrow to pay down another loan that is just a refinance. This won't change the deductibility of interest at all. I have a private ruling on this sort of thing - my loan shuffling strategy.

 

that's fantastic!!! been thinking about doing this ... say if i draw down equity loan of 100K against IP1 to build a new house on my unencumbered land, to be IP2 ... later down the track after IP2 is tenanted I can extract 100K equity from IP2 to payoff the 100K equity loan from IP1 and still claim tax deduction on this loan interest ?

 

Yes potentially

 

why ''potentially'' ? are there any conditions in this case where the tax deduction may be void? ... my biggest fear here is loosing my ability to claim the tax deduction

 

Yes heaps. Have a read of my tax tips

 

Great post Terry

 

Very informative post Terry