Hi all, I’m only new to this so be patient with me if what I say comes across as stupid!!!!!!
My husband and I purchased our house two years ago and it is valued at approx $380k – we are paying off a loan on this of $180k – meaning we have $200k in home equity.
We would like to buy a farm in Tasmania (yes don’t laugh) and use the farm as our principal place of residence and keep our existing home as an investment property. My question is, do we have to pay CGT on our existing property because it will now become an investment?
Also, we are drawing on appox $30k of the equity in our existing home as a deposit for the Tassie home and plan to finance the balance of $70k, my next question is, is there a way we can pay interest only on our current home (investment) and as much money as possible on the farm (Principal residence). My reasoning being that our current property should increase in value by another $100k over the next 5 – 10 years while the Tassie farm will not appreciate in value a great deal.
Hi,
Firstly, you aren’t stupid. Anyone who is remotely interested in their financial future is already smarter than 80% of the country.
Even tho your existing house will become an investment house, you still won’t pay CGT on it unless you sell it.
In response to your second question, it probably is a good idea to convert your non-tassie house to I/O to improve cashflow. This depends a little on where abouts it is ie, whether it fetches mega rent, or has poor yield but great growth prospects. If ya talk to a competent mortgage broker they will provide good advice since they have probably seen a similar situation before.
-Regards
Dave
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