Hi all,
I was speaking to my bank lender who said I may be able to claim the interest charged on my PPOR loan if I redraw from my PPOR loan to use as a deposit on an IP. Is this true? If so, how is it calculated?
Thanks in advance.
Regards,
ZayneWow stop right there Zayne.
I must admit one of my pet hates is unqualified Bank staff providing Tax or Financial advice.
Whilst you are able to claim the interest for an IP the method of raising the funds is the important issue.
Certainly do not use a redraw facility and if the Bank suggest that you cross collaralise the loans steer well away.The simplest way of structuring the loan is to cancel any advance repayments on your PPOR and then take out a separate loan which you can use for the deposit and then have a standalone facility secured against the IP itself.
If you have a problem with your lender then get your mortgage broker to take the loan away.
This day and age carefully structured loan planning is something the major Banks give little consideration to as the staff are not qualified so a good independant broker should be able to put you on the right path.
Regretfully you certainly cannot claim the interest on a redraw loan hRichard Taylor | Australia's leading private lender
Your input is greatly appreciated. Thanks again Richard for your help.
That's interesting….
I have always redrawn from my PPOR loan to fund 20% deposits for my investment properties and have certainly claimed the interest for it! I do set the deposits up as separate sub accounts though, as it makes it easier for the accountant.
The other 80% is a stand alone home loan preferably through another financial institution.
I was always told that its not where the funds come from, but what purpose they are used for, that makes the interest tax deductable.
Am I wrong? Cos, I've been doing for years, with different accountants and have never had it disputed.
Cheers
Hi Diclem – You are correct. The problem is a lot of people mash personal and investment/income generating purposes all together, redraw willy nilly, and then it is one big mess, especially if they try and claim the lot as 'deductable' interest still. As long as you can show you used the money for the deposits/investment it is fine, and you have made that easy by using sub or split accounts. Even if you use an Line of credit on your PPOR you still would need to split/seperate it as you have. Good idea to utilise different lenders and keep the loans as 'stand alone' too…..
All the best with your journey…..
Ok so at long as they are 2 seperate loans I can claim the interest charged from borrowing form my PPOR to find a deposit and stamp duty for an IP?
Please note that I am not an accountant or even close!
And thanks to V8ghia for his/her input, much appreciated.My PPOR loan is actually a line of credit. When I wish to purchase an investment property, I ask for a new sub account or split, as some call it, to my loan which is used to fund the deposit plus costs. The other 80% for the new property is a separate loan at another bank/financial institution.
It is best to separate your investment portion of debt from your PPOR portion of debt.It is not necessary for tax reasons to have the 80% loan with another bank than your PPOR, but most investors prefer it that way.
You should really consult an accountant to ensure you set up your loans/assets correctly, but I hope this helps a little.
Good luck,
Suezayne wrote:Ok so at long as they are 2 seperate loans I can claim the interest charged from borrowing form my PPOR to find a deposit and stamp duty for an IP?Thats what I do!
His …..
Hi, Your post suggests that you weren't sure that you can claim the interest on the 20% deposit drawn from the home loan.
It's true that you can claim all interest paid no matter which loan it is. That's why it doesn't make sense not to use it! However, if the PPOR loan is used, calculating the interest is much more tricky.When I started buying property, it never occurred to me that I'd need to do the tax & it was an awful mess. What saved me was that I didn't have an initial loan on PPOR so whatever I borrowed was for investment only.
If you do a 20% redraw on PPOR as a deposit, you might want to make sure that the interest on the 20% is very clear and can be defined as investment interest.
Good luck,
Kum Yin
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