My wife and I will soon be renting out our current PPOR. We will move into a rental interstate, with a view to buying another house to live in after 2-3 years. We dont expect to live in the current PPOR in the future.
The PPOR is valued at 480K, we owe 206k, but I can redraw 27k (not offset acc) so therefore the mortgage would be 236k on the PPOR if I did the redraw. I can rent the house at $350-$360 a week. From my sums I would have to put in around $40 a week to keep the property running.
First question: If I redraw the 27k will my tax deduction for intrest be calculated on the 236k amount or is it limitied to 206k as I have already paid the mortgage to this level?
Second Q: What are some of the considerations in redrawing this 27k. I do need a bit of it to finance our move but not much. Plus I need to buy a second home (new PPOR) in a few years time. If I leave it all on the current PPOR it will just be +ve geared. If I redraw it it will just be -ve geared.
Thanks in advance,
I am not sure of the ramifications of redrawing the money and tax etc, however i know similair questions ahve been asked and answered before, you might want to check older posts. If you redraw the money and sit it in an offset against the current loan, then you are still getting the benefit of paying interest on a lower total loan, but you have access to this money when the time comes to buy a new property. Also if you switch the current loan to interest only you may find that it is cashflow positive or neutral. I would be having all of the rental income and perhaps your job income paid into this offset account. Whilst it is an 'investment property' earning an income you want to ensure that you are not paying it down and then pulling money out to pay for a new PPOR as this money will not be tax deductible.
I hope this post makes sense
cheers
Sonya
Hi Sonya,
Thanks for your post. The idea of the offset account sounds good. I am currently looking for an IO with a good rate and offset. Those three dont seem to go together a lot from what I nhave seen. I was also wondering if there was anything a bit more savy I should be doing?
I will check out those older posts.
Thanks
Have a look at ANZ i ahve an IO loan with a full offset account and a good interest rate. I have had the loan for nearly three years now, so not sure if the same deal is currently available or not. But it oculd be worthwhile making some inquiries.
Cheers
Sonya
Cheers
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