Am I structuring my loans correctly

NeedMoreTime · 24th Jul, 2014

Hi guys,

Just wanted to get some verification that I'm not doing something silly with loan structure. I don't know any good mortgage brokers and don't seem to have the time Monday to Friday to try and meet with one.

I have a PPOR and an IP and looking to finance another IP. All amounts are approximate and all loans are through the same bank for convenience.

PPOR value 800k, loan A 90k + loan B 90K + offset account
IP1 value 540k, loan C $430k (80%) + loan D $130k (20% deposit + fees secured against PPOR)

The plan on the next IP is the same as IP1:
IP2 value 320k, loan E $260k (80%) + loan F $80k (20% deposit + fees secured against PPOR)

So the questions are:
1. Is this a reasonable way to have the loans setup?
2. Am I cross collateralised by securing the deposit and fees loan against the PPOR?
3. Is there a better way to access the equity in the PPOR for deposit and fees?
4. Are there any mortgage brokers in the Brisbane CBD you recommend?

Thanks in advance!

Peter_Tersteeg · 24th Jul, 2014

1. If the two IPs are under the same ownership structure, you could merge loan D & loan F into the same facility to keep things simple. A lot of people like to keep it separate for ease of accounting, but if it's all for the same deductible purpose the detectability of these two loans can be apportioned fairly easily.

2. Based on the structure, there doesn't appear to be any cross collateralisation. It's still possible, but unlikely.

3. Thus far it looks like you're doing things correctly.

4. Rolf Latham and Richard Taylor both post here and are in QLD, I don't think they're in the Brissy CBD though. They're both excellent brokers.

Jamie M · 24th Jul, 2014

Peter_Tersteeg said:
4. Rolf Latham and Richard Taylor both post here and are in QLD, I don't think they're in the Brissy CBD though. They're both excellent brokers.

+1

Top guys and outstanding brokers.

Cheers

Jamie

Terry_w · 25th Jul, 2014

1. generally good - but you don't say what sort of loans and how the money was used.
2. Not enough info, could still be crossed
3. LOC. Don't forget to borrow to pay for investment expenses.
4/ Rolf and Richard

NeedMoreTime · 25th Jul, 2014

Thanks for the replies everyone, sounds like I'm on the right track. Will definately contact Rolf or Richard for IP3 next year

Terry_w said:
1. generally good - but you don't say what sort of loans and how the money was used.
2. Not enough info, could still be crossed
3. LOC. Don't forget to borrow to pay for investment expenses.
4/ Rolf and Richard

1.One of the PPOR loans is fixed at <5% and the rest are variable.PPOR is PI and the IPs are IO. Not sure what you mean by how the money was used other than to buy the properties

2. The 80% loans are secured aginst the IP, the rest (20% + stamp + other fees) is secured against the PPOR.
3. So instead of loan F I get a LOC against the PPOR? Does that make it more difficult at tax time and what is the advantage over a loan?
4. Thanks they seem to be popular

Thanks again.

Terry_w · 25th Jul, 2014

NeedMoreTime said:
1.One of the PPOR loans is fixed at <5% and the rest are variable.PPOR is PI and the IPs are IO. Not sure what you mean by how the money was used other than to buy the properties

How did you pay for the IP costs. where did money come from, transit and go to.

Trying to work out if the interest on these is deductible or not.

If you don't use a LOC there is a good chance you cannot claim the interest.

NeedMoreTime · 25th Jul, 2014

Thanks for your patience Terry

The mortgage registration fees, transfer fee, stamp duty and 20% deposit all came from loan D and F above and secured against the PPOR.

The money went straight from the bank to solicitor who dispersed all funds. The full loan amount went to the investment property so I plan to claim all interest on it as a duduction against the IP.

Is this correct to ensure its deductable?

Waldo · 25th Jul, 2014

NeedMoreTime said:
I don't know any good mortgage brokers and don't seem to have the time Monday to Friday to try and meet with one.

You might find that you're able to find a good mortage broker who can work outside of the normal work hours. A lot of them will atleast do phone calls after work - they understand that the majority of their customers have jobs.

Terry_w · 25th Jul, 2014

NeedMoreTime said:
Thanks for your patience Terry

The mortgage registration fees, transfer fee, stamp duty and 20% deposit all came from loan D and F above and secured against the PPOR.

The money went straight from the bank to solicitor who dispersed all funds. The full loan amount went to the investment property so I plan to claim all interest on it as a duduction against the IP.

Is this correct to ensure its deductable?

As long as the borrowed money went straight from the loan account to the payment then it should be fine.

NeedMoreTime · 26th Jul, 2014

Thanks everyone!

Redom · 26th Jul, 2014

All looks pretty good. Great work if you did it doing your own research.

One more thing is that you want to be ordering your lenders right too. It seems like your interested in building your portfolio over time. Selecting the right lenders at the right time can multiply your borrowing potential. There was a pretty decent forum on SS not to long ago on it.
http://somersoft.com/forums/showthread.php?t=100069

Never met Rolf or Richard, but their posts have been very useful on this forum.

onion33 · 26th Jul, 2014

Hi Terry,

I've also just bought my first investment property and am about to start paying the conveyencer, title fees etc. Are you saying I should pay all these costs out of the investment property loan?

What about costs for inital repairs? Do I pay that out of the same loan too??

Thhanks.

Terry_w · 26th Jul, 2014

onion33 said:
Hi Terry,

I've also just bought my first investment property and am about to start paying the conveyencer, title fees etc. Are you saying I should pay all these costs out of the investment property loan?

What about costs for inital repairs? Do I pay that out of the same loan too??

Thhanks.

Yes, borrowing would free up cash which could be used to pay down non deductible debt.

onion33 · 26th Jul, 2014

And if I've already paid off all non deductible debt, should I still borrow against the loan and then just offset it with the cash?

Terry_w · 27th Jul, 2014

onion33 said:
And if I've already paid off all non deductible debt, should I still borrow against the loan and then just offset it with the cash?

Depends on your situation and the family situation.

Maybe not as essential, but can still be a good strategy if you want to upgrade the PPOR down the track and/or you have a spouse on lower income.

Rolf Latham · 27th Jul, 2014

onion33 said:
And if I've already paid off all non deductible debt, should I still borrow against the loan and then just offset it with the cash?

borrow money when you dont need it is a maxim that applies most times.

There are obvious exceptions.

Please seek specific personal advice

ta
rolf

ChrisA1 · 27th Jul, 2014

Waldo said:
You might find that you're able to find a good mortage broker who can work outside of the normal work hours. A lot of them will atleast do phone calls after work - they understand that the majority of their customers have jobs.

Agree, I get emails frequently on weekends and after hours. It might be good to develop a relationship with a MB to clean up your current loans and understand how they work, before you need them for a purchase. The MB recommended here are great, including that they give time to assist other investors (as well as other professionals posting here

).

Am I structuring my loans correctly

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NeedMoreTime

Peter_Tersteeg

Jamie M

Terry_w

NeedMoreTime

Terry_w

NeedMoreTime

Waldo

Terry_w

NeedMoreTime

Redom

onion33

Terry_w

onion33

Terry_w

Rolf Latham

ChrisA1

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