where should I put the surplus fund

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.

 

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

 

Subaccount, as Jess said you will further contaminate funds

 

What do you mean $10k surplus funds?

 

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

 

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.

 

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

 

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

 

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.

 

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.

 

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.

 

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)

 

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.

 

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.

 

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.

 

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.

 

I got it. Thanks all for your advise.

 

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.

 

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?

 

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.