HI all, I am new to this forum but have found some valuable info on here.
My situation is, I am wanting to rent out my current house and buy another to move into. my current house is worht about $380k and I have $145 left on it. The rental income should be around $375pw. I was hoping to buy another property to move into for around $500k inc all fees.
I really have no idea how to structure the loans. Broker is saying one way, friends who have done this say another.
Variable, partly fixed, equity loans, I am getting lost.Any advice would help
Hi Josh
Firstly welcome to the forum and i hope you enjoy your time with us.
It is not unusual to get conflicting advice between your Broker and friends and even between Brokers.
Unfortunately it looks like your current loan is a P & I based loan so you are limited to what you claim in the way of interest deductions for the existing loan whilst renting the property out. This was probably not structured correctly in the first place.
They way i would look to go forward is to access 20% of the new purchase price plus acqusition costs using the security of you current PPOR / future IP using an equity loan and then take a 80% standandalone loan secured against the new PPOR.
Keep the loans separate and not cross collateralised and look to link a 100% offset account to the new loan.
Rather than make the same mistake again look to take the new loan on an interest only basis if you think you may 1 day rent out the new PPOR and move again.
Be interested to hear what comments both your friends and current broker has suggested.
Cheers
Yours in Finance.
Richard Taylor | Australia's leading private lender
Your existing PPOR will be positively geared while you will not receive any tax deductions on your new property. This does not put you in a good position taxwise. Change the existing loan to interest only. In hindsight you should have been paying interest only with extra funds in an offset account. That way you could have puuled the money out to finance your new purchase and the full loan on the first one would be tax deductable.
If you do take money out of the existing loan for deposit etc this also is not tax deductable.
If you intend staying in the new purchase put any extra cash into that one (via an offset account is best). Then even if you decide toi move on again you can access the funds and not lose tax benefits.
Or you could buy the new one, rent both out and rent elsewhere (claiming tax deductions). Then you still maintain ther first one as you PPOR and if you move back within 6 years (even if for a few months) you pay no CGT.
I agree with Catalyst
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