Hoping to get some advice…
I currently fully own a unit which is my PPOR (worth 300k). I'm looking to buy a new home to move in to (490k) and would like to keep the unit as an IP. Is this worthwhile considering I do not have a mortgage on it?
I am able to borrow 100% for the new property if I used the unit as collateral – what are the risks/benefits of this option? Should I jsut sell the unit and buy later in life.
Please help.
The trouble is that when you borrow funds for a PPOR, the interest on the loan is not a tax deduction.
Generally when people come on this forum asking a question such as this, the advice tends to be to sell the unit, and buy a new home with that. Your gain will be CGT (capital gains tax) free. If you want to buy an IP and deduct the interest on your tax return, you have to have borrowed the funds for investment purposes in the first place. You originally borrowed funds for your unit as a PPOR. So I don't see how you'd ever be able to claim bank interest on it as a deduction, unless you did something fancy like sell it to a unit trust which you control, in which case you'd need some help from someone in the know.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Just on the borrowing side, it may be better if you take out a LOC on the existing property and then borrow the rest as a new loan secured on the new property. This way you can avoid cross collateralisation.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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