All Topics / Help Needed! / IP equity to pay out home mortgage?

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  • Profile photo of MillyMilly
    Member
    @milly
    Join Date: 2004
    Post Count: 288

    hullo there,

    I am wondering if it would be sensible to refinance an IP, to pay off my PPOR.

    I owe $35k on my PPOR and I have about $80k equity in an IP. I was thinking that the interest on the new loan would be tax deductable.
    But then the IP would be negatively geared. I do not earn that much and dont need too much of a tax break.

    The other issue is I have no other savings. I have always had the redraw facility available, should I need anything. I have 4 kids to send to pvt school. I do need to have some funds available.

    Perhaps it’s time to see a fnancial advisor. Has anyone got any advise for me?

    cheers
    milly

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    You could do that, but the interest would not be deductible. The ATO looks at the purpose of hte funds, in this case it would be to pay non deductible debt.

    Terryw
    Discover Home Loans
    Mortgage Broker
    North Sydney
    Terry@discoverhomeloans.com.au

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Mobile MortgageMobile Mortgage
    Member
    @mobile-mortgage
    Join Date: 2003
    Post Count: 913

    Hi Milly,
    As Terry mentioned, releasing equity from the IP will not be deductible if used for non-investment purpose.
    If cash flow is a problem I would suggest you look at ways of reducing your non-deductible debt, Have you investigated the benefits of an offset attached to your non deductible debt, as this may help pay down your PPR debt at a faster rate,

    Have you considered interest only repayments on the IP debt, as this would also help increase your cashflow, other suggestions may include looking at ways to justify and implement an increase in rent on the IP, Cheers.

    Regards
    Steven

    Mortgage Broker
    Mobile Mortgage Market
    Ph: 0402483216
    info@mobilemortgagemarket.com.au

Viewing 3 posts - 1 through 3 (of 3 total)

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