Transfer PPOR (soon to be IP) to spouse but not mortgage

For starters you are saying that you want to transfer a property which in reality is owned by the bank to her, no bank is going to let that happen without discharging the mortgage first. Just like when you sell a car, as long as there is a loan, the banks hold the item as security, that is the difference between a secured and unsecured loan – the item must remain in the name of the borrower, as your wife is not bound by the contract between you and the bank, you signed it not her. You can only sell, dispose of, gift the item after the loan is paid off.

You say that it is your PPOR? If you still live in it, why not re-mortgaging the property and purchasing another, it is your PPOR after all, I would suggest finding out if there is any time limit on when you could move to a new property after taking out the mortgage or if you would be able to move the day after the loan is settled.

Finally, I am new to QLD, so I am not 100% sure on the actually rules, but in NSW if your spouse, (wife/husband or de facto – meaning you have live in a relationship for more than 6 months) has owned property before, neither of you are eligible for the stamp duty exemption. (Plus remember there is a minimum period of time you have to live in the property after settlement). Even if you satisfied the stamp duty exemption, you have to live in it, making it your PPOR, meaning you can take out a loan for against the property and use it to purchase another property, which you can then live in later, and (as far as I am aware) leave the loan on the current property as tax deductible when you leave.

If I am mistaken someone let me know please, as this is how I understand it.

Aussieguy – hope I don't offend you, but virtually everything you have written is not correct.

1. The bank doesn't own the house, the legal owner does and the bank just has a mortgage – huge difference.

2. taking out a new mortgage on this property won't help with the deductions at all. Purpose of borrowings is relevant.

3. not sure what you mean about time limits but this doesn't apply because of 2.

4. You are confusing the FHOG with the exemption for transfers between spouses. In NSW adding a spouse on title of the main residence can be stamp duty exempt even if the spouse has owned property before.

5. There is no minumum time you must live in the property after settlement.

6. The last part you are confusing yourself!

What you need to do to fix this part of your problem is to sell your property to your wife. Your wife needs to buy it off you for full market value and to borrow to do so. Then later when it is an investment your wife will be able to claim all associated expenses and to negatively gear – which may not help that much if your wife is not working and doesn't have an income. There is also no income tax on incomes less than about $20,500 pa either so she would have to earn more than this to save tax.

Stamp duty won't be exempt I think because you are transferring from one name to the other name and are doing so at market rates. If it was to remain the main residence and you were adding her name (and keeping yours) then it would be possible – but possibly only if for no consideration.

CGT would probably be exempt but you would need to discharge the loan and to reapply again as Aussieguy correctly pointed out above.

So, I suggest you do some figures and see if all the costs and hassle will be worth doing this. Your wife may not qualify for a loan without a job, but you could go on the loan together or guarantee the loan – with no tax effects – to enable finance to be achieved.

You would have to rejig all your loans so as to maintain less than 80% LVR overall. But this can certainly be done. for example the new one you buy may end up with a lower LVR with the overall LVR being 80%.

Complex but doable.

With normal personal funds in an offset, this would be okay (repay, then withdraw with a separate account), however I'm not sure what the scenario is with borrowed funds. I'm sure Terry has a better idea.

Also why would you repay it into the IP loan and not the PPOR loan? By repaying it into the IP loan you are losing deductibility.

Cheers,

Tom

This won't work because you would now have a mixed loan. Each payment into a mixed loan comes off each part of the loan in proportion of the loan amounts.

So if your current loan is 270,000 with 100,000 of this sitting in an offset:

100,000 private debt = 100/270 x 100 = 37%

170,000 investment debt = 63%

270,0000

—

So if you placed 100,000 back into this loan then 63% of this amount must come off the investment portion.

Yes, all owners must be on the mortgage or guarantee the loan. But as Tom says why worry about this? Why do you want the loan in your name? Deductibility to determined by use. If you are going to be using a LOC attached to this property then she would be onlending the money to you.

If she cannot get a loan because of lack of income then all you have to do is to guarantee the loan or even go in a joint borrowers.

This thread shows the importance of getting proper advice from qualified people before doing things. Don't take tax advice from a broker or credit advice from a lawyer as they don't know and cannot advise in areas outside of their knowledge.

Wrong.

who used the money and what was the money used for?

I dont' know QLD laws, but would be surprised if this allows one spouse to buy and get the grant when the other spouse has previously or currently owned property. Why not give the OSR a call.

If it does then it will be a significant opportunity.