Hi, can anyone help me out. We are buying a block of land which we intend to build on BUT not straight away. We also currently have a mortgage on our own home. Can anyone advise as to which type of loan is the best to get and whether there will be any tax deductions available?? I am leaning towards a P & I as the repayments would only be a little bit more than IO payments. My plan is to eventually sell my current home down the line and then build. We have friends to stay with during the building period.
Thankyou kindly.Hi agordon, wellcome to the Forum,
A loan on a vacant block of land where you intend to construct an owner occupied residence is non-deductible debt,Regarding the best loan? More information is required.
Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Hi agordon,
Like the idea of I/O on the block and then put the money you were otherwise going to use as P/I into making additional repayments on the house – provided you have a redraw facility.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
I am really grateful for all your replies. I guess I dont really understand the principles of an Interest Only loan. If anyone is willing to provide me with this information I would be very grateful. My current loan is an equity loan.
Thanks very much.agordon, suggest you contact an accountant, or the ATO, or do a search of these forums.
I’m sure that I saw somewhere that if you built within a certain period of time (ie 1-2 years) that you could claim the interest as a tax deduction if it was for investment….
Cheers
MelThanks very much for all your replies.
My query is why would you then take an interest only loan when you could take a p & i loan and therefore have at least part of the loan paid off. I am of the understanding (that is my interpretation only!!) as since I wont be able to claim any interest on owning a block of land I am better off getting a P & I loan. Please let me know if I am heading in the wrong direction. So confusing. BUT i am really grateful for all feedback – this is such an AWESOME forum!! Well done!!
Hi all,
Just following up on Mel’s comments it is possible for interest on a block of land to be deductible provided you can demonstrate (and you did) intent to build an investment property on the land.
There are some restrictions about timelines and the like but it can be done.
I will endeavour to locate the relevant ruling in my quieter moments.
Interest only also frees up additional funds as your regular payments are less than P & I. For me all my IPs are I/O while I focus our energies on paying down our PPOR loan – when we get to this position then we will assess whether we convert some IP loans to P & I, or not.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by The Mortgage Adviser:A P&I loan requires higher minimum payments than an interest only loan. This is obvious. Interest only loans mean your ‘liability’ is less each month.
The benefit of interest only is that if things go wrong, you are not stuck with the higher P&I repayments. You can pay more than the interest only so you can pay as much as you like. The benefit here is that you have access to all the principal payments you have made while your loan is interest only if you get a redraw facility in your loan.
You are right about paying it off quickly though. It is not deductible. Using the interest only just gives you a lot more flexibility.
Remember, any redrawn amount, if for investment purposes, is tax deductible.
The Mortgage Adviser
[email protected]
Ph: 0414 347 771Comments made are of a general nature and should not be construed as advice to any particular individual.
Another benefit of IO with a redraw facility with an increase in land value and a new valuation, you then increase this available limit.
This is beneficial in that when it comes time to build it may then be possible to borrow the full amount of the construction without having to tip in a further deposit.
This is why I love house/land deals here in QLD with the land prices still increasing in some areas you can do an IP with very little money down.
Brendon
Acute Mortgage Reductions
http://www.acutemr.com.au
[email protected]Hi all,
The case in case in question is referred to as the ‘Steele CAse’ and there are a number of entries in the ATO website giving specific details about the hows and how nots of interest on vacant land being deductible.
As often is the case in these instances Dale Gatherum-Goss (Melbourne based IP savvy accountant) can provide the shortened version over at Somersoft.
Here is the relevant link.
http://www.somersoft.com/forums/showthread.php?t=15843Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
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