Hi everyone,
I've just got a question about Portability Loan.
If I have 2 houses, one paid off and one mortgaged, is it possible to
transfer the loan from the mortgaged property to the paid off property?
E.g.
House 1 (Paid off - Cash Sale)
- Living in as my PPOR
House 2 (Loan)
- Building at the moment
Once House 2 is ready to move in, I am planning to rent out House 1.
Is it possible to get a portability loan where I transfer the loan of House
2 to House 1.
By doing so, I will pay off my new PPOR (House 2) and have a loan on my new
Investment property (House 1), allowing me to claim tax deduction on House
1 as it is now an investment property.Will there be an issue with the ATO?
Your reply is greatly appreciated.
Thank you,
Brian
Hi Brian
Subject to your lender there should be no issues in doing a security substitution however this will not achieve your objective.
Interest deductability is based on the "original purpose test" as applied by the ATO and clear here the original purpose was not for investment. The security used to obtain the loan is neither here nor there and therefore had the PPOR been used to secure a loan whose purpose was for investment the entire interest would be deductable.
There are a couple of ways of achieving what you are wishing to do but these will incur stamp duty and possibly CGT.
I would need to now more details to advise you further.
Richard Taylor | Australia's leading private lender
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