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Will this contaminate my loan?

Discussion in 'Accounting & Tax' started by JMica, 3rd Oct, 2015.

  1. JMica

    JMica Well-Known Member

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    For my next IP purchase I want to borrow 100% of the purchase property prices ie 80% from the new IP and 20% through equity release of existing IP.. However the bank is not doing any equity release on current IP, so I will have to change banks if I want access to this equity..

    My thoughts are I won't bother going through the refinancing process till I find the right IP, however refinancing will take a while and I would need longer than the cooling off period to organise this.

    My broker suggested the following and she seems to think that it won't effect my tax deductibility but I'm not sure..

    She suggested, putting forward my own money after the cooling off period and then when the property settles taking back the excess funds.

    I don't know about this, would this contaminate my loan ? Ie not then 100% tax deductible..

    Keen to get your thoughts !
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What
    What does this even mean?

    Do you mean you will pay x% into the agent's trust account and then later replace this money with borrowed money?

    It could work, and I have written about this before, but it would probably need for the agent to give back your money before you pay again with borrowed money - otherwise the agent could be giving back the borrowed money.

    And if you are redrawing from a home loan to pay this deposit then this will contaminate the home loan - which won't be an issue unless the home is rented at some point.
     
  3. JMica

    JMica Well-Known Member

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    Yes I wasn't really sure what she meant, she seemed to be implying that I just take the surplus funds from settlement ?

    Just seems a bit messy for my liking, just trying find a work around so that I don't have to go through the refinancing process before finding my next IP..

    Does anyone have any experience with agents giving back money from the trust ?

    The money will be against an IP investment so it would be tax deductible.
     
    Perthguy likes this.
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Agents hold money on trust for the purchaser until settlement then it becomes property of the vendor. So it is still your money, but there are obligations under the contract. Any excess money paid into trust would still be yours and would be returned after settlement.