Terryw’s Ideal Loan Structure

Hi Terry, This is a great post. Thanks for sharing these great tips.

My PPOR has been fully paid out. I am looking to buy my first investment property using the equity from my PPOR. I do not have the loan A in your structure. How should I set up a loan structure for future investment properties?

With thanks and regards,

 

You could just borrow the deposit against the main residence

 

Hi Terry,
Just signed a contract on an investment property and have been asked to pay the initial deposit within 3 days.With it being the weekend will not be able to organise with the bank to release funds from the Equity release loan from my PPOR which is in the process of being approved.
Can i pay the deposit using my Cash now and then once the Equity Release loan is approved reverse this somehow.

 

You could pay cash but you would be throwing away 30 years or more of tax deductions.

Get some tax advice

 

Hi Terry,

Found this forum a few months ago, thanks for all the tips. You are a legend!
Just had a quick question, in the process of sorting out an equity spit and structure for my first IP.

Going to structure as per the tips:

Loan A 350K PPOR (P&I)
Loan B 100K (Equity) (IO)
Loan C XXXK Investment Property (IO)
Offset Account on Loan A

What do you do if you do not require the total equity loan? Say you only end up using 80K for Loan C expenses, how do you pay this back without making a mess.

If all salary and rent etc. get paid into the same offset account, does it matter if all bills get paid from the offset. E.g. Offset has direct debits to pay Loan A,B,C and living costs.

Anyone that could give me some advice? Hope I am not posting in the wrong spot. Would hate to mix loans

 

My advice is to get specify tax advice. I consulted with someone today whose broker set things up wrongly and it will costly over $1000 per year in lost tax deductions for many years to come.

 

Hi, Terry! Thanks a lot for sharing the tips in this great post.

After reading the posts, I am thinking of buying my PPOR full-paid and use the equity from the PPOR to buy my first IP. However, I am planning to retire and will not have income soon. Is this plan still possible in my case?

Many thanks.

 

You'll need some sort of income to either borrow or withdraw equity regardless

 

Its possible, but you probably should not do that.

 

Thanks again for the generous advice you offer this forum Terry and all contributions - great to have such a community.

Just seeking ideas on how you would modify this loan structure for someone who already has an IP and then buys a PPOR? Or is it more that this strategy can only be done for the next IP based off the equity generated by capital gains from the PPOR?

Furthermore, I have run into some inheritance which I plan to use towards the PPOR purchase to make up for what the borrowing capacity does not cover. After reading through the forums it seems like the best way may be to put in the inheritance and consider splitting the PPOR loan for IP purposes if the need comes? Would that be correct or is there another way?

 

If you have an IP and want to purchase a main residence you might want to consider borrowing against the investment property for the deposit - without cross collateralising securities, at owner occ rates. You can then pay down the split and debt recycle it into further investments or loan recycle and debt shuffle it over to investment debts so you can save a bit of interest without investing further.

 

Of course, the borrowing against the IP (as security) doesnt give any deductibility to the use of the money as the use is to buy a private home. Important the new amount is a separate split so the two seperate uses dont blend and create a tax problem down stream when the inheritance is applied. You only want to reduce the non-deductible debt and interest. If it was blended it would reduce the deductible IP interest too.

 

We currently have PPOR only with loan of $560 000. We are paying $500 in extra repayments per fortnight and $200 to offset account. At the moment we are considering IP which could possibly become PPOR down the track of maybe 7 years.
What is the best way to structure loans.

 

Depends on which lender you are with, how much redraw you have and how much equity you have available. Would also need value of new purchase.

 

Investing or paying extra in PPOR planning for retirement

Hi Marty,
Posted new thread with bit more information. Sorry very new here .

 

For starters you might want to stop paying extra into the loan and pay into the offset instead, until you get some tax and credit advice.

 

hi possibly answered already but what does this mean? its an equity loan product?

 

I will implement #6, the rest are in place.

 

Best to avoid equity type products

Loan Tip: 6 Reasons to Avoid LOC Products – In Most Cases Loan Tip: 6 Reasons to Avoid LOC Products – In Most Cases

 

Thank you Terry , readjusted my repayments will put all extra in offset instead.