Rob, the Hart’s case was about a specific product and situation. I am not an accountant, and don’t do this myself, but apparently it is still possible to capitalise interest legally.

This could enable people to pay off their home loans quicker, and claim more back in tax. So anyone wanting to do this should probably talk to a few accountant’s about their situation and see if it is possible.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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ANZ’s is 7.32% normally, but depending on the amount, there are discounts on their package of up to 0.70%.

Macquarie also have one (MEC) at 6.75% for amounts over $300,000.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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If you only have a temporary job, maybe you could change to full time just before your loan application. What you do after the loan settles is up to you.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Thats a lot of money for a book!

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Macquarie MMS – it can be used like a LOC, but is just a term loan.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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It depends what you want to do long term. If you never intend to return to your home, it may be better to sell. Otherwise you will be paying rent with after tax dollars and then be paying tax on the rental income.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

Martin

A trustee can be a beneficiary. I am a trustee of my trust and a beneficiary.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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regarding the capitalising of interest on an investment property, then this is not necessarily a no no.

I have heard that one person was paying an investment loan with a LOC (no it doesn’t have to be a LOC!!!). She then only pay the interest on the LOC.

eg. $500,000 loan, monthly interest is $2916. This interest is paid with money drawn from a LOC. ie it is borrowed. In the first month, the interest on the LOC balance (of $2916) will be $204. This is paid for with cash. So you are borrowing money to pay interest, and then paying the interest on this money.

This is one way.

Another way is to simply borrow money from the LOC to pay the interest and to let it capitalise.

There are plenty of businesses that operate this way – on borrowed funds. Running a property portfolio is a business.

If you are using a company or trust it should be easier to do.

BUT I am not an accountant, so please don’t try this at home unless your accountant is happy to proceed.

ps. Any accountants out there willing to comment?

pss. I am not doing this, as my home is paid off, but wish I had found out about it sooner.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Rob,

yes i do like LOCs. This was mainly because I used to put all clients to ANZ who do not charge any extra. (but I am getting sick and tired of ANZ lately). Using a term loan instead of a LOC would work fine.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

The Hart’s case only referred to a specific situation. There are still many people in property and business who capitalise interest legally. If you do this, your tax deductions rise, while you non deductible debts decrease faster, saving money.

My example with the rates was referring to rates on an investment property. Of course, if their loan had a redraw facility they could pay the rates from their home loan with the interest being deductible. It would be ideal if the redraw was free and they had a split loan to keep the accounts separate for tax purposes.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]