Hi
I am looking to upgrade to a larger property. We have about $400k equity in our own home (worth $800k) and would like to draw on this to upgrade and rent our place.Is there a way to structure the financing so we can gear up this property and have a smaller loan for the upgraded property? Obvious goal here is to maximize tax deductible debt and minimize debt on the new place. If anyone has links to more info about how this can be done I’m keen to see them too! I know we may be better off selling this and buying another investment property but stamp duty and selling costs (plus offloading in a down market) make that less attractive.
Thanks
JkYes.
Sell all or part of property to spouse and have spouse borrow to purchased. If the property is in VIC then it could be done without stamp duty.
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
Great advice Terry. It’s in our name as joint ownership. Can we sell
It to me as an individual (as the high income earner)?In nsw so will need to pay stamp duty. Obviously we are incentivized to reduce the purchase price right?
Reducing transfer amount means reducing loan which means less interest and less money freed up for the new ppor.
You will need a valuation for stamp duty purposes too
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
Hi Terry,
Curious how it would work in my parents case.
eg. Let's say they have a house work $1M. Joint ownership. Dad retired, mum on $50k. In NSW, owned the house for $15 years.
They want to move into an apartment worth $500k, perhaps use remainding money to purchase investment properties.Would dad sell to mum for the $1M, use $500k on apartment and pay capital gains on remainder of $500k? Would they be able to claim all interest back on mums tax (as negative geared) as the original house is now the rental?
Regards
NHGN
Since dad and mum own 50/50 dad would be buying mums share for 500k. Not the full million. Stamp duty would be on the transfer of the 500k transfer. Cgt may not apply if it was a main residence.
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, bit late to fix this i think, but my PPOR is worth around 480-520k, original P/I loan 0f 220k paid down to 130k. I did this before i knew any better. How can i turn this into an IP and take my 90k with me whilst leaving deductible debt? I can't see a way.
Was thinking only way to not have contaminated borrowings was to sell it cgt free, then take the lot and start again, and structuring it properly this time. Any ideas?
Yes that is a tough one.
What you could do is to set up a LOC and borrow to pay expenses for the property such as rates, insurance etc. This will free up a few thousand each year and will help, but is slow.
You should talk to your tax advisor about borrowing to pay the interest on the IP too. This will speed things up, but needs to be carefully planned.
And you have the option of selling to a spouse or just sell on the open market and start again. Best to run the figures
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
Thanks Terry , proves again that listening to the wrong people can prove frustrating and costly further down the track.
Free advice is very costly!
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
If i change the loan to interest only now with the last 130k would this be treated as new borrowings and therefore not deductible?
Solomon10 wrote:If i change the loan to interest only now with the last 130k would this be treated as new borrowings and therefore not deductible?Sorry will clarify that a bit better, if i change the loan to interest only with balance of 130k then have 100% offset while still my PPoR, when i move from here and it becomes an IP will the 130k be deductible?
Was the $130,000 used to purchase the house?
Changing the loan type won't affect deductibility.
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
Sure was mate, last 130 left of the original 220k borrowed for my PPoR. Thanks for the advice.
Then it probably will be deductible – or the interest on this $130k – when the property is available for rent.
The loan balance didn't drop below this level at any stage did it?
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
No, it hasn"t. It will over next few weeks if i don't change to IO but is lowest it has been. Understood that only the 130k would be deductible. What if i refinance to another lender so the only debt on this house is 130k, i think i saw another one of your posts that it would count as new borrowings and as it wasn't used to purchase the house it would not be deductible when the property becomes an IP? Sorry for all the questions..
Refinancing won't change the purpose as long as no additonal borrowings for private stuff
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
Thanks Terry, you re on the christmas card list now!
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