Hi,
I bought a property from my parents and instead of paying them money there was a loan agreement between me and my parents i.e. now I owe them an amount equal to say 90% of the property value. The loan agreement was done at the solicitior.
Now I want to get a loan from the bank using the property as security and cancel the agreement between my parents and I. The property will then change to be an investment property. Is the interest from the bank tax deductible?
Your prompt response would be much appreciated.Regards,
Sam
The interest on the Bank loan will be deductible once the property becomes available for rent.
Couple of caveats there in that i am assuming they vendor financed the property to you and that the figure of 90% represents 90% of the original indebtedness.
You may find refinancing a vendor loan a little harder than it used to be as many lenders will not accept it however your Broker should be able to point you in the way of an appropriate loan and structure.
Richard Taylor | Australia's leading private lender
Hi Richard,
Thanks for your prompt response.
What is a vendor finance? I read it on the net that for vendor finance the title usually stays in the vendor's name. However, the title has already transferred to my name. Is it still the same?
The 90% was referring to 90% of the property value at the time of sale to me.
Regards,
SamHi Sam
Ok i am assuming the Title was transferred to you and you in turn pay your parents monthly interest.
(Vendor Finance is just that finance provided the Vendor which appears to be the case here however the property was not sold by instalment as the Title has changed to your name).
Might have an issue as your parents will need to give you a loan statement showing your repayment history and you will be suprised how many lenders wont accept that.
Also if the refinance involves increasing the loan balance then you wont be able to claim an interest deduction on the additional borrowings.
I.e Assume the property value is $100,000 and you originally borrowed $90,000 and the loan balance is now $80,000 you cant go back and refinance to $90,000 and claim an interest deduction on the extra $10,000.
Richard Taylor | Australia's leading private lender
Just think of the parents as Bank A and now you are financing with bank B.
(Can't see how the above post by Galeel is relevant)
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
Terry it is not relevant but it makes good advertising.
Cheers
Yours in Finance.
Richard Taylor | Australia's leading private lender
Its a great method of advertising. say something irrelevant bt make sure there is a link to your website (also largely irrelevant as relates to a different country), then to prevent too much suspicion you just keep creating new user IDs and repeat the process.
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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