Hi All,
I'm a newbie and have been trying to research about property investing, buying and so on but I must say.. It's very overwhelming! I don't know much about it all so I'm in the process of learning!
This is the situation I am in. My fiancee and I bought a townhouse 3 years ago. We have been putting as much mioney as we can. We bought the place for $275K, we are now owing under $220K, and we haven't had it valued but I suspect it's worth around the $310K mark, just from watching sales in the same complex.
We have redraw facility on our loan, so the extra cash we put in, we can withdraw.
Now, we are looking at upgrading, moving into a new place around the 450K-500K mark, and renting out the townhouse.
we earn about 160K combined per year (before tax).
So my question is, to buy a new place, can we use the equity + redraw available on our loan as a deposit + fees on our new home??
As explained, I'm completely new to all this!, hopefully someone can clarify
You can, but it isn't as simple as it sounds.
Firstly, if you rented out your current home, the expenses associated with the home would be deductible, ie Council rates, water rates and interest. Interest is deductible because the borrowed funds were used to buy the house, which is now rented out.
If you redraw funds from the loan for non-deductible purposes, such as buyinga new PPOR, then some of the interest will be deductible, and some won't be. This is because of the purpose of the borrowings.
It would be best, for tax purposes, to keep the loans separate. This would mean getting a new loan, secured against your current house, to cover your fees and deposit etc. The MB's will have some ideas on the best way to structure this.
Dan
Always have an offset account against each loan. Put all money in there instead of on the loan. Then you can pull the money out when you want. And in the meantime, it holds off the interest.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
