gday,
a quiz for the mortgage gurus,
my current PPOR P+I loan 300K, house value 750k, 50k in an offset account.
part5ners IP value 350k , loan 100k.
I plan to "pay off" the loan by selling an IP in my partners name and transfering the money into my offset account.
Id plan to keep the loan alive while we look for a new PPOR, tehn use the funds in the offset to purchase a new PPOR and turn my current PPOR into an IP ?
any comments on optimising the strategy ?DS
Slightly confused as to what you are trying to achieve but wouldnt you better off to sell your current PPOR to either your partner or a Trust structure and use the entire net proceeds to pay for your new PPOR.
Richard Taylor | Australia's leading private lender
Remember to allow for capital gains tax….
Hi Dirty,
I understand what you are trying to do.
What I may suggest is firstly, switch your current PPOR loan from P/I to Interest Only.
When your partner sells the Inv Property and pay.cose her mortgage, there will be $250K left over (less any capital gains and selling cost etc). You want to them transfer these funds into your offset account which already has $50K, bringing the rough total of $300K of funds in your offset account – which effectivley is equal to your Loan balance of $300K, hence no interest charged.
When you find a new PPOR to move into, you wish to use the $300K offset funds as a deposit towards this purchase and rent our your current PPOR, thus converting into an Inv Property. The Interest Only $300K loan will be tax deductible (correct me if i am wrong).
I would then probably close or switch the offset account to the new PPOR loan and make all salaries/rental income be credited into the new offset account linked to the new PPOR.Naume
QLD 007
if i sold my ppor into a trust and used the procedes for my new PPOR, how can the IP be an tax deduction against my income?
BM33W" The Interest Only $300K loan will be tax deductible (correct me if i am wrong)."
this what im curious about too as the initial purpose of the loan was for PPOR, although my intention wqas always to live in for a while then move on and keep it as an IP, satisfying the TAX dept is the question.
I could be wrong here, but AFAIK the only way you can claim the interest the trust is paying (kind of) is if you borrow money to purchase units in a unit trust. The trust would then use the capital you have given it to purchase the property. Because the money you borrowed is for investment purposes (you've invested in the trust) you can then claim the interest on the borrowings.
This is of course dependent on your ability to get finance of the magnitude you are talking and would affect your ability to service the second loan you speak of.
Bear in mind any interest the trust pays is tax deductible within the trust, but (again AFAIK) any losses have to stay within it but can be claimed against future profits.
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