Hi,
I’m not an experienced investor and have recently had an offer accepted on a second home which we will move into. Our plan is to rent out our existing home.
We have paid off a lot of our mortgage on the existing place and I use the redraw facility on the mortgage as my bank account – so as to save on interest. I have read in the forums that I am not able to take any money out of this redraw and put it towards my new house.
To me this seems ridiculous as basically I can no longer spend my own money!
I haven’t settled on the new place yet and haven’t put my new mortgage request to the bank.
If I move the money in redraw into a MISA (Mortgage Interest Savings Account) now before I settle and before I rent out my home is this OK?
None of my previous tax returns have shown the status of my mortgage. I have no intention of defrauding the ATO but am concerned by this situation.
I could understand it being an issue if I was renting my old home out and decided to take some of my money out of the redraw AFTER I had started renting it out but if I do all this now surely it is OK.
Any advise would be appreciated.
Cheers,
StuI am facing a similar dilemma. Watching this thead with great interest. It's very nice to know that I could sell up CGT-free and plunge the money into another property, but frankly I see that as having wasted money in stamp duty and legals buying the house in the first place. Keen to see what others advise you to do.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Once you have paid down a mortgage you can never increase they value of the debt unless the property is sold to another party. i.e. you end up with a low tax deductible debt on the investment property and a high non tax deductible debt on your PPOR – This is not ideal.
Structuring yourself from the beginning is very important, I am yet to be convinced of a good reason to have P&I. Big mistake from the outset. i.e. you should always be on I/O with an offset facility.
Three good reasons for I/O:
1. Access to equity for a deposit for future investments
2. A buffer against foreclosure in times of desperation – no employment etc
3. As mentioned above the ability to maintain a good tax deduction.Is the property in one name? . If so, Providing client 2 can service the loan, they may purchase the property from client 1. The refinance will increase the debt for client 2. Property transfer b/w husband and wife attracts nil stamp duty. We now have a large tax deductible debt……..
There are lots of scenarios that may be played out.
It is very difficult to understand your situation from the limited knowledge of your personal circumstances.
Hi, Thanks for the feedback and sound advice.
The house is solely in my name and I came round yesterday to ‘selling’ the property to my wife. This is the cleanest way and sorts everything out.
This gives us a max mortgage on the old place which will be treated as an investment property and we can put the monies received into the new house.
Not sure I can get stamp duty free but am going to see what can be sorted out.
This was discussed on another thread. I'll try and find it.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Read this ; https://www.propertyinvesting.com/forums/property-investing/help-needed/4330739
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
number8,
I looked at transferring to my wife but in WA I can only transfer half of the house to her before we have to pay stamp duty.
My wife couldn’t get a mortgage to cover the full value of the house without me backing her up which then would mean I end up paying LMI on our new place.
Is it worth transferring half to my wife now and then the remaining half later (this would mean i only pay 50% stamp duty). Of course she would still need the ability to “buy me out” at a later date.
I’m a real quandary as to what to do.
As it stands I have approx $200k left on my mortgage, and $100k available on redraw. As I said before I have used the redraw as we’ve gone along as I wanted to keep all my money in the offset to help us pay the existing PPOR (now to become our IP) off faster.
My concern is if we leave the PPOR now and rent out as an investment can I claim the interest on the remaining $200k as a tax deduction? Surely that would be OK as I haven’t maxed out the mortgage by taking out the redraw I’ve accumulated.
Although this situation isn’t ideal it would still work as an investment. If I sell the old PPOR and buy another IP I would have to pay stamp duty again which negate any gains on selling the old PPOR.
Any advise would be greatly appreciated.
Cheers,
Stumurr
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