Hi,
I'm planning on turning my current PPOR into an investment property sometime down the track (next year or two) and purchasing another property which will become my PPOR.
A quick question on loan structures.. should I continue to pay down my current PPOR or start to pay interest only so when my current PPOR does become an investment property I have a higher tax deductable loan amount?
Hi Brunowa
An accountant would be able to best advise you.
It is my understanding that you cannot transfer equity from a PPOR to an investment property and claim the negative gearing benefits. So if you have a lot of equity in your current PPOR you would not be able to transfer this equity to your new PPOR. Do you have a large deposit for your new PPOR or will it all be debt? It is preferable to have all or most of your equity in your PPOR and all or most of your debt in an investment property to claim negative gearing benefits.
bfree2live
Hi Brunowa
I would converting the loan to an interest loan with 100% fully transactional offset account so that the savings are ready available yet the loan is protected.
Net interest result will be the same as if you were paying down the loan however the main thing is the savings in the offset account can be used for a new PPOR deposit and the interest on the total debt will be deductible.
Just make sure your lender operates a true offset account as their are some quazi offset accounts especially on interest only loans.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
brunowa wrote:A quick question on loan structures.. should I continue to pay down my current PPOR or start to pay interest only so when my current PPOR does become an investment property I have a higher tax deductable loan amount?Correct – if you anticipate turning it into an IP down the track, set up the loan as IO with an offset attached. You can continue to make the equivalent principle repayments into the offset account. Try to be disciplined and continue to make the principle repayments you would have normally been making (albeit into your offset).
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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