Third property - PPOR

Hello,


My partner and I are exploring ways to purchase a PPOR.


Our current situation is:

Party A: IP valued at $650k, 260k remaining on loan, 15 years to go.


Party B: PPOR valued at 425k, loan via family, IO in perpetuity, repayments approx $200 week.


We can borrow $580k from the bank (total income before tax $175,000).


Ideally, we would like to retain both properties and purchase a PPOR - valued at $800,000.


We have savings, approx $20,000.


I am unsure whether we should:

1. Sell IP and use proceeds to buy PPOR and have a reduced mortgage
2. Keep IP, but refinance, extending loan to 30year and reborrowing another 240k extra to take me up to 80% LVR (and use this 240k to add to the 580k we could borrow outright). Note, If I had 500k loan over 30 years on this IP, the rent would cover the repayments.
3. Do #2, discharge family mortgage on Party B PPOR, and reborrow through bank as P&I.

We are equally mindful of taking on too much debt given the state of the economy. I am also aware that we are in a strong position irrespective of if home prices go up or down, because we are individually on the ladder anyway - so it’s all relative. No kids, but likely within 2 years.


Is the general idea to load up debt onto the IPs so you can negatively gear, and have a reduced PPOR mortgage?


Any advice or thoughts is appreciated.

 

Sounds like a bit of non tax deductible debt vs tax deductible debt.

Re the IP you may consider selling - keep in mind there will be CGT.

How has the IP growth been so far? What are the future growth prospects? If little, and if it won't do a lot in the future, you could take money off the table and re-deploy.

Even if you 'load up debt' on to the IPs, and have a lower mortgage on the new PPOR, the money you 'load up' / equity drawn down will be used for an owner occupier property - which will still mean you can't claim deduction for interest incurred on those equity top ups.

Deductibility is tied into the use of money - money used toward home --> no deductibility

 

I disagree with this. did you leave out a 'cannot'?

 

speak to your broker about extending the loan back to 30 years on the IP. This will improve serviceability. Find out if it will be enough.

Who owns the current PPOR - one if you or a family member? Was this loan taken into account in the servicing calcs and if so under what terms? Is there a written loan agreement?

you can always sell one of the current properties down the track if you can service now, if you cannot then you might have to look at selling one of them to get the new one.

 

Oops I did too. Thanks

 

I suggest reading some of Terry w tax tips. Might be some option around selling to partner and taking the stamp duty and cap gain hit (on ip). Ianaa, Ianal.

Is the ip in tas? Might make sense to sell at peak of market and pick something up as it comes down.