Top 15 risk topics for newbies to consider

Discussion in 'Investment Strategy' started by Sackie, 6th Feb, 2016.

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  1. michaelk

    michaelk New Member

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    hi just want to ask what is the problem with using money from the PPOR offset account to fund a deposit for IPS
     
  2. Bran

    Bran Well-Known Member

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    You are spending your cash, so you are increasing your non-deductible interest bill.

    There are different ways and the brokers can comment, but if no equity, then the cash could pay your home loan, and then establish a loan split with the new loan then paying for your IP deposit and stamp. This way the interest is deductible, and you have reduced your non deductible debt by the same amount
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    There are more tax-effective ways to do it, for eg, paying down your PPOR loan with the offset cash, splitting the loan and using the redraw to borrow for the IP. This reduces non-deductible debt and increases deductible.
     
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  4. eskander

    eskander Well-Known Member

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    I'd also add
    1. Assuming all PMs are good at their job (this forum is a very skewed sample!)
    2. Not taking more interest in flaws with a property that can be used as negotiating points
    3. Not negotiating
    4. Getting advice from only one broker
     
  5. Bran

    Bran Well-Known Member

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  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Recogising that I dont know what I dont know.................

    ta

    rolf
     
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  7. Gockie

    Gockie Life is good ☺️ Premium Member

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    :) smart minds.... you know I only recently cottoned onto this thanks to all you smart minds... pity my partner won't let me do anything like this though, so all my deposits will just have to come from growth in IPs...
     
  8. Eugene82

    Eugene82 Well-Known Member

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    Jess, wouldn't you be loosing the flexibility of cash in offset account? I would have thought getting the equity from ip or a separate split on PPOR was more effective given that you still have to meet serviceability? Sorry I'm not a broker just trying to figure it out.
     
  9. Bran

    Bran Well-Known Member

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    I've only learnt this here too. Makes me cringe about my old mixed loans
    If you know that that cash is headed for an IP deposit, you just have to decide from which source is best - same amount - offset cash (increases on-deductible interest), separate loan split (deductible interest).
     
  10. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Tick, tick, tick and tick.

    We recently/are still in the process of doing this now. Pulling deposit for IP out of future PPOR offset account, refinanced future PPOR without splitting.

    Future PPOR (which will remain an IP until end of this year) increased loan settled in Jan and excess was moved into offset. About to draw the entire amount out of offset for 20% deposit on IP, servicing maxed.

    Anyway to rectify?
     
    Last edited: 8th Feb, 2016
  11. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    (Also @michaelk)
    You would lose flexibility, which is why I would suggest paying the funds into the PPOR only when you know you're about to buy an IP.

    Servicability can actually be improved (with some lenders) by doing what I've said due to being able to use neg. gearing on the new split. Your overall debt position is unchanged, just the deductibility of the interest on the new split is different.

    For eg -
    Before - PPOR debt = $300k non-deductible, currently offset with $100k cash.
    Pay $100k cash into PPOR loan
    After - PPOR debt = $200k non-deductible
    New loan split for deposit = $100k deductible

    Otherwise you're using $100k cash out of your offset, which effectively increases the interest you pay on your PPOR which is non-deductible.

    If you have other options they may be better, for eg if your PPOR is going to become an IP down the track and you have equity in PPOR or another IP and can service, using that can be another option that may work out better. Depends on future plans.

    Point is, there's often better ways to get a deposit than using offset cash. :)
     
    Last edited: 8th Feb, 2016
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  12. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Get specific advice - did you use a broker for this or DIY?
     
  13. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Haha! Weekend post and run - didn't read the previous comments :p But full marks for being spot on ;)
     
  14. BigKahuna

    BigKahuna Well-Known Member

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    @Leo2413 That's a great list. I would also add:

    never make a decision while under pressure or in haste; in other words, never let your emotions get the better of you in a ppty transaction.

    Make yourself your own 'guru' & don't follow blindly; there are no altruistic property gurus.

    Research your chosen area very well before you start making offers.

    Don't feel like you've got to hurry or that it's a race.
     
  15. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    DIY. We went to two brokers prior who couldn't get it across the line.
     
  16. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Really? How strange!
    Which lender are you with? Depending who you used, it might be a simple split, repay and redraw. But it also may not - some loan accounts will automatically close when repaid so you need to be sure it won't before attempting this!
     
  17. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    We made the mistake of 2 brokers, 2 different offices but same franchise. Communication with both was poor, we weren't kept in the loop and both over promised and under delivered.

    Qantas CU are sending me a form to split today. I am going to go get advice before taking it any further.
     
  18. Sackie

    Sackie Well-Known Member

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  19. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Unfortunately we were already pretty advanced in our finance arrangements prior to joining PC so the next purchase is already going through valuation etc. now. Going to seek legal advice from @Terry_w next month, hoping we haven't made any irreversible decisions in the interim
     
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  20. Sackie

    Sackie Well-Known Member

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    @Tim & Chrissy thats one of the great things about this place - some of the experts in their fields and consultants are quite good. I have engaged a couple for different things and have been very pleased and also built some good relationships.
     
    Last edited: 8th Feb, 2016
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