Hi,
We’ve just bought a second house. We wil be moving out of our current house, which we own – with a mortgage. We intend to refinance. We will definitely go to interest only on the invetment property (our current house).I have always believed that banks would lend up to 95% on an investment property and that it was possible to ‘move’ equity to the new property. The bank’s (Westpac) lending officer has told us that they would only go to 80% and the tax deductability of interest payments would only be allowed on the extra borrowing (ie; basically we would convert the mortgage on the investment property from about 200K to about 400K). He reckons the tax departnment only allows tax deductions on the interest paid on the extra 200K.
This doesn’t seem right to me.
Questions are:
(i) is it possible to borrow more than 80% on an invetsment property? and
(ii) is tax deducution allowed only on interest on ‘new’ borrowings when ‘converting’ one’s current ‘principle place of residence’ into an invetsment property?
mjjg wrote:(i) is it possible to borrow more than 80% on an invetsment property?Yep, up to 95% is possible at present. Not easy – but certainly possible.
mjjg wrote:(ii) is tax deducution allowed only on interest on ‘new’ borrowings when ‘converting’ one’s current ‘principle place of residence’ into an invetsment property?Tax deductibility is determined by “purpose” – what is the “purpose” for borrowing the funds. If you’re borrowing to purchase a new “primary residence” then these funds will not be deductible (because it’s not an investment). However, the loan on your current primary residence will become tax deductible once it converts into an investment property.
FYI – your Westpac banker is crossing your loans and restricting your borrowing to 80% LVR (this is giving them total control of your assets whilst minimising their risk). This is not in your best interest. I know this is going to sound incredibly biased – but this is a perfect example as to why using a broker who understands investments can be of a huge advantage.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
mjjg wrote:The bank's (Westpac) lending officer has told us that they would only go to 80%I am not a broker but if you are self-employed this may be a reason for the LVR limit stated.
It may also be a postcode (greater risk for bank) issue for one or both of the properties.
I don't understand alot of the lay public who don't understand the enormous benefits of utilising the advice and help of professionals – particularly when they're free of cost and obligation. Look at Mortgage Brokers for instance: must be licensed, have the required educational qualification and stick to strict codes of conduct. They're FREE people – use their experience, knowledge and advice and then decide whether you can do better yourself! What does Robert Kiyosaki say in 'Rich Dad, Poor Dad': POOR DAD listens to friends and relatives RICH DAD listens to experts and follows their advice.
There! I've had my 'vent' for the week folks!CHEERS!
TCDerek wrote:mjjg wrote:The bank's (Westpac) lending officer has told us that they would only go to 80%I am not a broker but if you are self-employed this may be a reason for the LVR limit stated.
It may also be a postcode (greater risk for bank) issue for one or both of the properties.
Good point Derek. I was assuming a full-doc loan.
In any case, you don’t need to cross your securities to achieve the same outcome.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
mjjg wrote:Hi, We've just bought a second house. We wil be moving out of our current house, which we own – with a mortgage. We intend to refinance. We will definitely go to interest only on the invetment property (our current house). I have always believed that banks would lend up to 95% on an investment property and that it was possible to 'move' equity to the new property. The bank's (Westpac) lending officer has told us that they would only go to 80% and the tax deductability of interest payments would only be allowed on the extra borrowing (ie; basically we would convert the mortgage on the investment property from about 200K to about 400K). He reckons the tax departnment only allows tax deductions on the interest paid on the extra 200K. This doesn't seem right to me. Questions are: (i) is it possible to borrow more than 80% on an invetsment property? and (ii) is tax deducution allowed only on interest on 'new' borrowings when 'converting' one's current 'principle place of residence' into an invetsment property?Don't take tax advice from a bank employee. The bank is not licensed to provide this advice and it is incorrect anyway.
The extra $200,000 will be borrowed to buy a property which you will live in, therefore it is unlikely to be investment/business debt and therefore the interest on this portion won't be deductible. If you increase the investment loan to $400k without splitting it then you will be throwing money away as it will be difficult to apportion the interest and any deposits into this loan will be coming off your investment portion as well as your private portion 50/50.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Mjjg,
I agree with Terryw, in regards to 80% lend, CBA have just upped their LVR to 95% and for a low rate look at St George who are offering 1% off.
Incredible isnt it a Banker giving Tax advice wants next the girl at the local will do in branch your'e conveyancing.
Simple answer is approach someone who knows what they are talking about.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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