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Thanks Terry.
That make it clear.
Hi Tom,
You assumed correct. I’ll be staying at current PPOR, where LOAN 2 is used. I’m buying another IP.
I’m trying to divert LOAN 2 to buy another IP.
From your quote:
If you don’t have equity but instead have cash funds you want to use, then you can pay down some of the non-deductible loans, and then take out a separate loan as above for deposit + costs for new IP for same deductible result.
I was thinking along with what you said. I have cash funds that can paid off LOAN 2. If I paid off LOAN 2 and re-finance at the same time with the same lender and with the same amount with LOAN 2, would this be considered valid for tax purposes?
Thanks
Adam
Continuing with my new situation….
In summary from old post, I was refinancing to convert PPOR to IP. I ended up with:
1 x IP with:
LOAN 1 – Tax Deductible
LOAN 2 – Non-Tax Deductible because I used it to buy my PPOR1 x PPOR with:
LOAN 3 – Non-Tax Deductible because it is used to buy my PPOR
Now, I’m looking to buy another IP. So the questions:
Can I now claim LOAN 2 as tax deductible? How do I link this LOAN 2 to say its purpose now is to buy another IP?
If the above is not possible, how do I convert LOAN 2 so it can be tax deductible?
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This reply was modified 10 years, 2 months ago by
adam.p. Reason: Terrible formatting
You are right. My investment site/land value is below $250K.
My current PPR under my wife name was previously use as rental property from previous owner. I didn’t notify SRO when I bought it because I didn’t know I have to do it. Is it my job or conveyancer to notify SRO?
Now, I need to lodge Land Tax exemption request to SRO. I need to supply proof that it is my wife PPR. This is challenging as all bills are under my name.
Anyway, thanks for the quick reply.
Sure Harvest wrote:Adam, have you considered an evergreen LOC. These are designed on an IO repayment with some lenders requiring no review for 30 years (hence evergreen). Rates can be slightly higher and qualification for a LOC can be more difficult today thanks to NCCP, but it achieves your outcomes as a set and forget IO loan.I have not, still have 9 years to go with my current IO loan. I'll worry about it later but still prefer IO with Offset.
Jamie M wrote:s0805 wrote:Jamie M wrote:adam.p wrote:Thanks Jamie. That's what I had in mind.ANZ are a bit funny – they see changes such as reverting from P&I to IO as "credit critical" so ask for a new application to be submitted. There's been moves to change this – and I've been told that these sort of adjustments can be made in branch now, but I'm still reluctant to send my clients direct to a branch to have them fiddle with their loan accounts.
Jamie
Hi Jamie,
I am in process of getting this arranged and that is what they've advised me as well, more than 1 month in waiting not getting the docs right. The process change at ANZ is a joke and time its taking as well….what are you advising your clients full application OR have they started doing this in branch now?
Cheers
A lot will come down to who lodged the application and how it was presented. Every bank has it's issues with processing – but if the application is submitted correctly from the start, there's a much better change of it all going through without too much hassle.
Cheers
Jamie
The reason I was in the bank before were to change from P&I into IO. But this is mainly because I was promised IO loan but when it was very close to settlement date, they produced P&I loan and didn't have enough time to change it.
After 5 months, I went back to the branch with different manager. There is no notes left in the system to change it to IO loan or even mentioning wrong loan being setup, so I have to fill up "Change of Request" form with reason as "Tax Planning". No other forms submitted.
The process took 1 week to get it changed.
Thanks Jamie. That's what I had in mind.
I just wanted to know if this is ANZ thing, not the same for all lenders.
Thanks Terry.
Can anyone recommend me property valuer for S.E. Suburb in VIC?
I tried to get quotes from several valuers but the quote given to me about $660.00 mark. Is this about right? They only asked the suburb and estimated value.
Hi Jamie,
To clarify my question:
I have an IP but only on my Wife name.
The loan is on me and wife name. The loan is secured against this same IP and for the purpose to buy this IP.
It will be negative gearing IP. So, with this scenario, who is allow to claim tax deduction?
Thanks
Hi there,
Browsing this forum make me realized I've been missing steps when converting PPOR to IP. Apart from getting property revaluation, is there anything else that needs to be recorded prior changing to IP?
Thanks
In the future, if I take out new LOAN4 (secured against new PPOR), with the purpose of paying of LOAN2 (secured againts IP), does this LOAN 4 become tax-deductible?
I've spoken to ANZ.
They agree with LOAN1, LOAN2, LOAN3 as I mentioned before, IO with/without offset.
They can do multiple offset accounts but they only give 1 free. For every extra offset accounts I need to pay $10 / month.
They also allow me to switch which loan to be linked to which offset account in the future for free. So for now, I linked the only offset account to the loan with most non-deductible debt, which my PPOR.
Thanks for everyone comments.
Combining Tom's and Jamie's comment, I understand the following:
– I need to have 2 x offset accounts
– 1 x Offset Account for LOAN 2
– 1 x Offset Account for LOAN 3
– If I only have 1 Offset Account on LOAN 3, I'll have to ASAP paying off LOAN 2? In this case, it makes more sense to have offset account on LOAN 3 since it has more debt.
Then more questions to ask. Will it be more beneficial if I do the following:
Using Security A (PPOR > IP):
Loan 1: IO, with offset, amount – $218K
Loan 2: (separate split from the above): IO, with offset, amount – $50K
Using Security B (New PPOR):
Loan 3: IO, with offset, amount – $300K
LOAN 1, it's IO, with offset. It gives me:
– a choice whether to reduce interest paid on this loan or on another loan
– Offset account will mainly have balance of $0.00
– I just want to have an option in the future if I want to reduce interest paid but still have money to be withdrawn
LOAN 2. It's IO with Offset. It gives me:
– As long I have $50K in the offset, I don't have to pay interest
– If in the future I need to buy a new IP, I can withdraw this $50K and claim is as Tax Deductable portion? Is this still valid? Since I've used this $50K portion to buy new PPOR but later top it up to be withdrawn to buy the next IP?
LOAN 3. It's IO with Offset. It gives me:
– Since money is sitting in Offset, it makes no different paying Principal early. Assuming I won't withdraw unnecessarily from my offset account.
– In the future, if I want to convert this PPOR into IP, I can keep full $300K as tax deductible portion
I may have miss something. It seems loan type of IO with offsets is the best scenario for most situation.
Did I miss:
– The total setup/running cost to have IO and offsets are too expensive?
– Same lender will not allow me to do it?
– Other thing?
Thanks Tom.
I'll talk to the loan manager to arrange the above. The last time we spoke, he seems to combine LOAN1 ($218K) and LOAN2($50K), but I haven't agree to anything yet.
PLC wrote:*offset can be linked to either account or both, but should be linked to at least one.
Do you mean 1 Offset account can be linked to more than 2 loans?
If for example: new PPOR loan approved: $300K. This is separate from current PPOR -> IP refinance.
Assuming going for the same lender for:
– Refinancing PPOR -> IP
– New loan for new PPOR
Which of the following the same lender will give?
Scenario A:
LOAN 1: PPOR to IP, IO, No Offset, Amount: $268K ($218K + $50K)
LOAN 2: new PPOR, P&I, with Offset, Amount: $300K
or
Scenario B: (prefered scenario to split IP and PPOR loan)
LOAN 1: PPOR to IP, IO, No Offset, Amount: $218K
LOAN 2: new PPOR, P&I, with Offset, Amount: $350K ($300K + $50K)
Thanks for the comment. I now understand.
Basically there is no way to increase current loan and claim tax deductible on full new loan amount. The tax deductible part pretty much stuck with existing loan amount.
Also in the same situation, have been reading posts, discussions and still something missing for me.
Using the same figure but with the following existing structure:
1.) Current PPOR: P&I, 100% offset, no redraw facility
2.) Refinance PPOR. Using the same figure from rickgm83, the extra $50K goes into 100% offset account.
3.) Convert PPOR into IP (for this dicussion, loan type doesn't matter)
4.) Buy new PPOR using money from offset account (where that extra $50K were deposited)
Questions:
a.) If there is delay from point 2.) to point 3.) above, is that $50K deductible? It was sitting in offset account. The point is, that $50K surplus is not used immediately to pay new PPOR.
b.) There is no redraw facility but only offset account. Will this really make any different when refinancing PPOR, convert to IP and buy new PPOR immediately? Most of the discussions I read is because they have redraw facility but not offset account.
c.) Assuming point a.) answer: $50K is deductible. How long to wait before converting PPOR into IP so that it's legally to claim that $50K as tax deductible?
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This reply was modified 10 years, 2 months ago by
