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  • Profile photo of benmbenm
    Participant
    @benm
    Join Date: 2005
    Post Count: 3
    July 25, 2005 - 3:53 am

    Thanks all for the replys.

    Sounds like no-one can decide whether or not capitalising is deductible.

    Personally, I do not see why you would even want to do this as the tax benefit is far less than paying the debt down!!!

    I was thinking of doing this to take a year off work and travel and/or spend more time finding good investments.

    I’m starting to think if my sole source of income is rental income and i don’t have any non-deductible debt to pay off, I might be in the clear.

    I probably won’t be in a position to do this for atleast 12 months, so may PM you (Terryw) if I can’t sort out any advice for myself. Thanks for the offer.

    Thanks to ez-rent for the Google thread also.

    Profile photo of benmbenm
    Participant
    @benm
    Join Date: 2005
    Post Count: 3
    June 2, 2005 - 4:27 am

    I think I just understood what Mortgage Advisor is saying –

    Original Property owing $80k
    Worth $120k
    Equity is $40k
    BUT, you must keep 80% LVR on this property.

    Therefore 120*20% = 24k of equity you must keep in this property. So of you’re $40k equity, you can only use 40k – 24k = 16k

    If you want to skip LMI on your next property, then using your 16k you can borrow at LVR 80% = $80k.

    Hope that clears things up.

    PS. I’ve just started investing, but I went for LMI to get a 90% LVR on a property of just over 100k it costs less than $1000. I capitalised it, so it only costs approx $50 per year in interest.

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