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where should I put the surplus fund

Discussion in 'General Property Chat' started by twau76, 1st Sep, 2016.

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  1. twau76

    twau76 Member

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    I have a subaccount 50K for an existing loan, which I used 48K for an IP, and 2K for personal use.
    now the IP is ready for settlement and I will have around 10K surplus fund, just wondering whether I can put this 10K to 50K subaccount, or put it back to the new IP loan, and wait util there is enough equity (48K), then repay it into the 50K sub account together with 2K. Could you please advise which way is the good way, or any other better way? Thanks for your help.
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    I'd just leave it in the sub account. You have a mixed loan now though which isn't great.
     
  3. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Subaccount, as Jess said you will further contaminate funds
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What do you mean $10k surplus funds?
     
  5. twau76

    twau76 Member

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    Hi Jess,
    Do you mean I need to open a new sub account for the new IP loan or put the money in the sub account of the existing loan which I used it for 10% deposit?

    Regards,
    Tony
     
  6. twau76

    twau76 Member

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    Hi Terry,
    The IP loan can cover all the deposit and expense for settlement due to the market value has gone up, and there will be still around $10K left. I was wondering whether I could repay the first 10% deposit which I took from the subaccount of my existing loan( but it is mixed as 2K is for personal use.), and what would be the best way to handle this? Thanks.
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Hopefully, your loan looks like this -
    Loan 1 - Main property loan
    Loan 2 - IP sub account. Put the funds in this one. :)
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    But what is the original of the $10k. It sounds like it is borrowed money - where is it now?
     
  9. twau76

    twau76 Member

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    Thanks Jess. The loan looks like:

    Main property loan
    Sub Account 1:
    Sub Account 2: 50K, (48K used for IP and 2K used for personal)

    IP loan: so I should put that 10K in this IP loan for now, once the IP has enough equity (48K), then I can repay back to main property loan - sub account2 together with 2K, is my understanding correct? Thanks.
     
  10. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    If you used $48k for the IP, and $2k for the personal use, where is the $10k coming from? Did you actually only use $38k for the IP?

    When your IP grows enough, you can top up that new, main loan and use the funds to pay off the current sub account 2. Leave it open though, and use it for another deposit.
     
  11. twau76

    twau76 Member

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    I think this should be borrowed money. I haven't got that money yet. was wondering how should I deal with it when I receive it.

    Here is how I get $10K number, for exampe, IP was 480K (Off the plan)
    Main property loan
    Sub Account 1: xxK
    Sub Account 2: 50K, (48K used for IP and 2K used for personal)

    Current IP price is 555K, I can borrow 555K*80% = 444K, so the surplus fund from bank would be 444K + 48K - 480K - some expense = around 10K.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    In that case I would just pay it back into the loan. Don't worry about the mixed nature - just 4% of the loan would be non deductible (on taht split)
     
  13. twau76

    twau76 Member

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    Thanks Terry. so I can pay it back into Main property loan - sub account2, right?
    and in this case, is the IP loan full deductible as 4% of 10K is non deductible? or this can be ignored, as it is very less.
     
  14. Username86

    Username86 Well-Known Member

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    I know its only 2k but wouldn't using borrowed money to pay a contaminated loan contaminate the new loan? Such a small amount probably doesn't have huge impact but would make things bit more complicated for the accountant.
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes pay it back into this. Not it cannot be fully deductible (interest part) because it is a mixed loan. You could probably claim around 96% of the interest, but check with your tax agent.
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yeah, it would be messy but just has to apportion the interest.

    The alternative would have been to split the loan into 2 with a $2000 portion that would be too small to get a separate loan for.
     
  17. twau76

    twau76 Member

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    I got it. Thanks all for your advise.
     
  18. dabbler

    dabbler Well-Known Member

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    Go see your accountant, but if your yet to finish all this, I would pay back the 2k & only claim once this is done and property is leased. Any excess can go in an offset account, check which one is offset.
     
  19. Username86

    Username86 Well-Known Member

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    Is it possible to pay the 2k back when its mixed with the other 48k I would have thought you would need to apportion any repayment at the same ratio?
     
  20. dabbler

    dabbler Well-Known Member

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    I do not know if they will pick you for this, you will be claiming less & whats the diff if you apportion. You could split also so it is only related to the IP.