Could anybody tell me the draw backs and if it is possible to borrow against our existing property to buy another home to live in, and rent existing property to pay off loan. Is this a bad idea? Any tax advantages or disadvantages. Currently owe $55,000 on a $350,000 peoperty. Any help would be appreciated.
Hi Zeeke,
Yes you can use the security provided by your existing property to buy another home – be aware that any redraw or equity loan would not be deductible under the circumstances you have outlined.
I would suggest that in the main you are better off remaining in your existing home (if that is possible) and buying another IP as this will maximise your interest deductions assuming a similarly valued property is purchased as an IP.
And yes it is possible to convert your current home to an IP – any deductions and declarations needing to be made would be the same as a standard IP.
The only consideration you would need to provide would be to establish a value of your existing home so that you can enjoy some some your free Capital Gains for the period that your existing property is your home.
Derek
[email protected]Property investment advice and researched property in quality locations available.
I agree with Derek, but would add, one disadvantage may be the fact your old home would be positve geared and so you will be paying extra tax on the rent received. Froma pure tax perspective, you would be better off staying put.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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