Seeing some of the familiar and knowledgable faces from a few years ago is a great thing to have when I have this question.
We are thinking of moving further out of Brisbane onto acreage. We want to build the home of our dreams (not a McMansion but a decent house all the same).
One of the options which I hadn't overly discussed with the wife is that we refinance the house we currently live in which is worth about 400,000 and use it to purchase the last and start the building process.
We currently owe less than 100,000 on the house with about 50,000 offsetting in the savings.
A few minor snags would be that the entire property currently is in my name (not that we are looking to link the loans anyway). The refinance would take it well past the previous value I had paid stamp duty on so I gather I will be paying on that increased value as well (perhaps wrongly but I believe this to be the case).
Without paying Mortgage insurance I would say that the total loan value would be 320,000 (including the currently loaned value) and using only a small amount of our saved money for the fees for the loan increased or included in the loan value. The objective then would be to turn it into an investment property and use it until such a time as the house we would build would be ready to move in.
Would a Line-Of-Credit be the best option in this instance?
How easy is it to use the money for an investment property on a new but owner occupier (future) property?
cheers,
sizzling_duck
You got to understand that the new loan against the old home wont be tax deductible so there is not much point to taking out the LOC. Even if a loan is secured by an IP the deductibility is determined by what you spend the actual money on. In your case it will be a new PPOR so it will be personal debt.
The easiest thing to do will be to cross collaterise the two properties and just take out a new 100% loan for the new home.
The most tax effective thing would be to sell the old home and take the equity to the new one. Then borrow 100% to buy a new IP if you like.
If you really think that the old home will make a great IP then you can "sell" it to your wife. She "buys" it from you at it's full value with a 100% loan. This is now deductible for you and you have freed up the equity to buy your dream home. Drawback is that full stamp duty will be paid on this "purchase" . May be well worth it as a cost to free up the cash – do the sums.
Hope this helps and sorry for the bad news.
Thanks for the response.
I was sort of expecting this, which is why I was asking the question. I doubted I could but would prefer to find out rather than close the door on that option altogether.
So really my choices are:
Keep the 100,000 dept and make it a +ve rental
Sell it and use the money to clear out most of the debt for the new home
Transfer the title and the ensueing large debt to the other half for full stamp duties
or
Xcollaterol which seems much the same as option 1? Seems to add a level of liability to me though?sizzling_duck wrote:Thanks for the response.I was sort of expecting this, which is why I was asking the question. I doubted I could but would prefer to find out rather than close the door on that option altogether.
So really my choices are:
Keep the 100,000 dept and make it a +ve rental
Sell it and use the money to clear out most of the debt for the new home
Transfer the title and the ensueing large debt to the other half for full stamp duties
or
Xcollaterol which seems much the same as option 1? Seems to add a level of liability to me though?As far as I am aware those are the options. Of course the xcoll is up to you – I was just saying that this is the simplest method rather than establishing two new loans as described. Many people feel xcoll is to be avoided at all costs. I am not one of those and feel that is can be useful and sometimes should be avoided.
Ciao
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