If the amount of interest claimed on an IP suddenly goes up when there has been no interest rate rise, then it may ring alarm bells at the ATO.

I think there may even be a question on the tax return asking if any investment loans have been increased during the year.!?!

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

While the property is an investment you should be able to claim all costs associated with it including interest, depreciation etc.
But you will not be able to claim it as your main residence until you move in, and this will mean it will be subject to CGT (if any gains!!) during this period, if you sell.

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

You should be able to get 95% LVR in most areas of Australia (up to $150,000) with the mortgage insurer PMI. check to see if the location is listed on this:
http://www.pmigroup.com.au/locationwizard.asp?attractor=4

If the suburb is not listed there or if the loan is higher than $150,000 it will be very hard.

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

Yes becareful there!

A quick way is to ring your credit card company and to ask for an increase in your limit.

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

FFComm

CGT is not necessarily 30% in Australia. It would depend on the structure used and may be much less.

Some banks will allow a 2nd mortgage, and caveats can be place on title without the lenders permisison.

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

You should be able to do Tenants in Common anywhere in Australia.

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

What exactly is your problem? ie why couldn’t you get an approval for Melbourne? Is it serviceability? Location?

I would suggest you talk to another broker. If you have enough equity in your property, then it may not be much of a problem.

Some questions:
What do you mean by bridging finance for the Melbourne one? Has the bank agreed to lend you the money for this one as long as the Sydney one is to be sold?

What is the value now compared to purchase price?

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

Hopefully this is a temporary situation. So I wouldn’t be too concerned about renting for a while. Prices probably won’t move mcuh in the next year. Then you can buy the new house.

You probably would not be affected by capital gains tax either. You can rent you house out for up to 6 years and not have to pay CGT if you sell in this period.

It would just be a bit of a hassle having to move twice.

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

Tax deductibility depends on the purpose in which the funds were used, not the security used.

So if you increase you home loan to buy shares/property the extra interest incurred would be deductible.

The problem lies in determing the extra interest if you have one big loan.
eg. If you have $50,000 owing on the home loan and then borrow another $50,000 for investment, in one big loan when you make your monthly repayment, the ATO may consider you to be paying 50% of each payment off each part of the loan. You will be paying off deductible debt when you should be paying off the home loan first.

If the portions are not equal it will be hard to calculate the interest owing on each portion.

So a better option would be to take out a separate loan for the investment, make this interest only, and pay the minimum.

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

Yes I read it last year and agree. It is one of the best books I have read recently. There are a few more books by McGrath which I have on my must read list.

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