Hi all,
I’ve decided to do some renovations to our property which I expect to cost btw 30-35k incl. Kitchen, bathroom, adding 2Nd bathroom and other essentials such as restumping and new drainage.
I’m not sure whether it’s best to use savings or access the equity in the property to pay for these renos? Are renovations such as these tax deductible? What are the pros and cons of each?
I’m just a bit hesitant to use my savings as I’ve heard its better to use the banks money where possible? Therefore I’d like to keep my savings as deposit money for purchasing another investment property in the future.
Can anyone provide some guidance?
Am I on the right track?Is this for an investment property or your own residence? You can setup a seperate loan split against the property if there is sufficient equity to fund the renovation costs.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Hi Corey, thanks for the response!
It’s for an investment property.
Yes I’m confident that there would be sufficient equity to cover the projected 35K reno cost.Definitely draw from equity then, especially if you have any personal non deductible debt.
When there isn’t sufficient equity and the borrower has a principal place of residence with a personal debt, the other option is to use the cash funds to reduce the existing home loan, then setup a new investment equity release to pull out the same funds back out. These borrowings are then able to be used for the investment purpose and claim the tax deductiblity on interest – best of both worlds.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
For an IP – I’d look to borrow the funds and claim the deduction.
For a PPOR – if you had the cash available it would make sense to use it rather than borrow more.
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]
Thanks for the responses so far!
We do not have any personal non deductible debt or PPOR and are currently renting.
We do have equity available to access through the investment property’s growth.
Let me explain in further detail.
We have purchased a property and have plans and permits to build in the backyard and also want to renovate the existing front dwelling.We are now at the point of either:
1. Revaluing the exisitng property and accessing some equity now to use for renovations then apply for construction loan or
2. Going for the construction loan and use our cash savings for the reno.Just not sure which of the above 2 options is better? Can i claim deductions on the renovations i propose? (restumping, drainage repairs, new kitchen, new bathroom, add 2nd bathroom, painting, landscaping etc.)
We plan to purchase another inv. Property soon so need a deposit for that aswell.
We plan to keep both properties and access equity for future purchases.Can anyone provide the pros vs cons?
Benson
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