Hi All,
My wife and I are in a quandary. We have 2 ip's and have a mortgage on our own home. We want to sell our own home and move to a larger home which will cost more obviously. We are looking at our new own home costing say $1million.
The trouble is I hate the thought of selling an ip in this market but don't know of any other options we have. Our ip's were really bought to help fund our retirement in 15 – 20 years say.
Obviously we need talk to our accountants but they clearly don't give financial advice, just cashflow projections. We have another say $1500 monthly in our budget we could spend as necessary but this won't allow us to increase our mortgage to allow us to buy the larger home.
We have currently about $600,000 equity in our properties as shown below:
ip's value $1,100,000 and debt $640,000
own home value $700k and debt $550kOther than selling, what other options could we consider ?
Who could we go to for advice on this sort of thing ?Thanks for reading
edit: sorry this may be better in the help needed forum
is there a need to upgrade your home. you still have a very substantial mortgage on your PPOR to consider, yet going to a $1m property would potentially add another $300k to yuor debts.
the only option i see if you definitely want to pursue the PPOR upgrade is to sell off the investments and move to the $1m property. you'd still have a mortgage of $400k though on your PPOR.
I'd be aiming to eliminate PPOR lending as quickly as possible and then pursuing more investment. Maybe hold off a few years before upgrading your house.
Do a forum search for Derek Jones, he has a wealth of information that could help you.
Hi holo,
One thing you could do is to increase your debt against the investment properties and reduce your debt against your PPOR. You can till maintain the same overall LVR (~66% of your portfolio). The reason is the interest on your investment propert is an expense.HI Sanjiv,
If I read this correctly you are recommending transfering part of the non-deductible PPOR loan across to the investments. The ATO will still consider the purpose of these additional borrowings as being for PPOR and thus the interest remains non-deductible.
Hi Holo,
Without knowing the ins and outs of your situation (age, income, date of purchase, goals, asset base etc) it is difficult to provide comprehensive comment.
In brief I believe you need to ask yourselves why do we need/want a house with a bigger mortgage – and then weigh this matter up with the original intention for which you purchased the investment properties.
As matters currently stand you already have a large non-deductible mortgage and even if you sell the IPs and direct the profits towards the new PPOR you will still end up with a similar sized non-deductible debt and equity position. (This is VERY ROUGH maths) so you will need to check – in your calculations consider your CGT liabilities.
Sometimes delayed gratification is the answer.
Hi holo
Just adding to propertypower's comment- you need to be a bit careful how you change the balance since just borrowing more on your IPs to pay down your PPOR debt would usually NOT make the interest deductible.
Cheers
thanks for the replies all , much appreciated.
I understand that increasing the investment mortgage (interest only) and using the proceeds for my own home is not tax deductible as the prime reason for the loan is not as an investment but rather funds for my own home. Therefore that option gives no real benefit.
You are right Derek, the main reason for the ip's in the first place is a long term investment and to sell them, or one of them, negates this. All common sense and economic sense says don't sell them only to increase our non deductible debt. However we are not happy living where we do, this is why we are in a quandary.
Obviously I don't expect you guys to tell us what to do. Am just keen to ensure I am not missing something really stupid through lack of knowledge.
Reality is I'd prefer to move but minimise the increase in non deductible debt (using the extra $1500 monthly we could afford whilst keeping our ip's.
Quandary continues
Cheers
Hi Holo
Here's another strategy you may wish to try- I can't tell if it's any good for you but you should be able to tell:-
Keep everything
Rent out your current PPOR
Rent a place to live- maybe even try a few to ensure you like where you go before you buy in againCheers
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