Hello,
Some people have mentioned to me that if you capitalise your interest on your IP property and use the income to pay off your PR mortgage loan that will have benefits over the longer term.However, I modelled this for 10 years, and yes you pay off your PR loan quicker. Of course your IP loan goes up. If I compare two scenarios one where I capitalise the interest and one where I don’t do this (just pay my PR loan per usual and negatively/positively gear the IP), the difference after 10 year is minimal. In both scenarios I have paid of the PR and have about the same loan on the IP. Does anybody have some advice and experience with this structure?
Firstly, you will also need to factor in tax deductions.
Secondly, if you are doing it with the intention of paying your home loan off sooner then the ATO probably won't allow it. see TD 2011/D8
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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