All Topics / Legal & Accounting / Loan structures when buying a new PPOR.

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  • Profile photo of timbertimber
    Member
    @timber
    Join Date: 2005
    Post Count: 4

    Property A has been my PPOR for the last 8 years. It cost $75,000 and is now been valued recently at $220,000. The loan balance outstanding is $4,000. I have just purchased Property B ( loan of $280,000) which will now become my PPOR, but l fully intend to retain Property A which l will rent out. Is it possible to restructure the loans to do the following, I am thinking of accessing the equity 80% of the equity in Property A so that the loan balance on Property A will be $176,000 ($220,000 value @ 80%) therefore not attracting LMI and l can claim also the interest on that amount as a tax deduction. I would then utilise that accessed money ($176,000) to reduce the balance of the Property B (PPOR) to $104,000 ( $280,000 less $176,000) , which of course is not tax deductible ? Any thoughts would be welcomed.

    Profile photo of redwingredwing
    Participant
    @redwing
    Join Date: 2003
    Post Count: 2,733

    Hi Timber..

    I believe The purpose of the loan on property A is not for investment purposes (payind down the loan on Property B) so ‘not’ tax deductible..

    REDWING

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    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781

    Redwing is correct.

    Deductibility of interest is determined by the purpose of the loan not what it is borrowed against.

    So to draw money to buy a new PPOR will not be deductible even if drawn against a rental property.

    There are different strategies to get around this. Some quick and expensive, others slow and cheap.

    Best to do some searching here and speak to your accountant. I am happy to give some tips over the phone if you need them.

    Cheers,

    Simon Macks
    Residential and Commercial Finance Broker
    ***NODOC @ 7.15% to 70% LVR***
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

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