Hello all,
I was very excited to find an internet forum dedicated to financial matters.
I am hoping to get some free information, or at least be pointed in the right direction so I can make some good decisions regarding the purchase of a new property. I really want to avoid paying a FA ~$250/h if I can.My partner and I bought a house in Perth ~10 months ago with my partners sister in equal share (1/3 each). We all live in the house together.
In short, my partner and I can no longer stand living with her sister, and want to buy a new house to live in, keeping our current home as a long term investment. The sister would also move out and we would divide the rental income.
I am quite handy and would look to renovate our new home myself, and possibly sell it in 2 -3 years to upgrade or move interstate.I have quite a few questions which I need help with.
Should I be looking at interest only loans for either/both properties?
Given that the sister will own 1/3 of the investment property, I believe I could not or should not use the property to secure the loan for my new home?
If the above is true, when the mortgage on the existing house is refinanced, can I borrow more than the property value, to use as a deposit for my new home? ie to avoid paying mortgage insurance, and increase my negative gearing.A few months after purchasing the house, the sister got a new partner who is living with us. If they become a Defacto relationship (live together for 1 year?) will he have any control over the property?
If we were to refinance before they become Defacto, but his name was not on the title, would he gain any control over the property?
I do not want any of my financal affairs to be tied to him now or in the future.I dont expect anyone to give me expert advice for no cost (although it would be greatly appreciated), but if someone could at least take the time to suggest what information I should be looking for, and where I should look it would be fantastic. I am only learning at the moment so any help is useful. eg I only got an understanding of negative gearing last month, and heard that I could claim depreciation on the investment this month.
Many thanks,
Greg
Hi Greg
Firstly welcome to the forum and I hope you enjoy your time with us.
Wont go into the warning speech about "buying with friends or relatives" as i think you have learned the folly of your ways there.
In answer to a couple of your questions raised
Should I be looking at interest only loans for either/both properties? Yes i would recommend this with a 100% offset linked to the PPOR loan. However remember your sister in law will have a say as you wont be able to make any changes to the current loan without her agreement.
Given that the sister will own 1/3 of the investment property, I believe I could not or should not use the property to secure the loan for my new home? Again any additional loan you take out on the property will need to be in all 3 names so your sister in law may only agree to it if she can access the equity for a separate loan for her. Not Ideal.
If the above is true, when the mortgage on the existing house is refinanced, can I borrow more than the property value, to use as a deposit for my new home? ie to avoid paying mortgage insurance, and increase my negative gearing.
Couple of questions here. Yes you can use the equity in the property to offer as deposit but dont take 1 loan over the 2 securities or you will have more problems down the track. By refinancing however this does not mean that the interest on the new loan raised on the existing IP because deductible as the "purpose" of the funds will be for a PPOR deposit.
In relation to your sister in laws new partner he will have no rights to the property however might influence her when it comes to signing documentation, selling etc. Any sale of any share to him may trigger a stamp duty / CGT issue.
Have you thought about buying your sister in law out and the 2 of you owning the property.
Richard Taylor | Australia's leading private lender
Hello Greg,
As long as the property is used as for income-producing purposes and generally at market rates (even in part), the owner(s) of the property (assumedly including yourself) can claim tax depreciation.
Keep in mind that if there are joint owners, depreciation will need to be apportioned based on the legal interest in the investment property and that depreciation applies for the time the property was held and used as an investment property!
Good luck with your new home!
Kind regards,
Constructivity
http://www.constructivity.com.au
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