I bought a PPOR 2 years ago and after 1 year I started renting it out. During this time there were extra repayments going in which I didn’t realise the implications of until now. I plan to keep this property as IP for the foreseeable future / forever. I’ve now signed up for a 2nd IP. I need to refinance IP1 and extract some equity to direct towards IP2 and hopefully get both properties below 80% LVR.
At some point I would like to go a PPOR and / or IP3. I’m saving another deposit as we speak.
Original purchase price for IP1/PPOR was around $210k and now should value ~ $300k.
Can I still take equity from property 1 even though I’ve done extra repayments – The loan is only probably ~ $1000 ahead? Common sense says yes. But this will affect the tax deductibility of the new loan. In what way? How is it portioned and is there a way to roughly work it out without seeing an accountant?
Or should I just go about all of this differently? It’s really doing my head in.
Hi Lmitation
Firstly welcome to the forum and I hope you enjoy your time with us.
Your problem is not uncommon and something we hear from clients on a regular basis.
Loan structuring is probably one of the most important issues as getting in wrong can be extremely expensive and you dont realise until come June 30.
You need to tread careful to not only maximise your deductions but also ensure that your loans are standaloan and the securities are not cross collateralised.
Ideally I would recommend you engage the services of a investment orientated mortgage broker who can work through the potential issues and look at ways to correctly structure your loan to enable you to carry on acquiring investment assets.
Richard Taylor | Australia's leading private lender
Cheers Richard
As you said, it's a common predicament and I've read about it everywhere in my travels too.
Thanks for the list on your site. I've heard about CC and and was told to steer clear… I've since had some people suggest it to me and I just get this sick feeling in my stomach
Anyway I'll have to sort something out tomorrow.
Problem is that last time I went to a mortgage broker (probably the largest in Darwin). The guy I was dealing with has 5+ properties himself and was right into investment and really keen to help me out / very genuinely nice guy but whenever I asked him a question re tax, etc. he couldn't answer and said I should talk to an accountant.. which was just frustrating..
Thinking it over now though I was probably asking him really more tax specific questions which it wouldn't be right for him to answer if he's not an accountant – so not really his fault..?
But I'll make some calls hopefully I can do something ASAP.
No problems mate.
Feel free to drop me an email if you need anything else.
Often find a lot of Brokers even if they are small investors themselves have no idea about structuring or indeed are not licensed to offer financial advice.
Richard Taylor | Australia's leading private lender
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