Hi everyone, i am new to the forum and was wanting some help/advice…
We own our home outright and were planning on purchasing a new home for around $850k but we were wanting to turn our current home into an investment property…are we able to re-mortgage the home so that half our debt is used as part of an investment? I have been told that as we don't have a loan on our home any longer that we are unable to do this…but was wondering if there was a way to do this?
Thanks so much
Of course you can do this. Who advised you that you can't and why?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi Sarema
Welcome aboard.
Assuming the reason behind the refinance is to purchase your new PPOR then the short answer is no.
Tax deductibility is determined by the "purpose" of the loan – what are the funds being used for?
If you're refinancing your current PPOR loan to access funds for another PPOR purchase – the purpose is private use and therefore won't be deductible.
Sometimes there are ways around this – such as a spousal transfer or sale to another entity but they usually come at a cost. It's just a matter of weighing it up in terms of the benefits.
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]
Completely misread the question – I thought you wanted to borrow against your PPOR or another IP.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Thanks for your reply. We were told by our tax agent that we couldn't do it because the loan was already closed and if we wanted to reopen it the only way would be as Jamie said to sell a portion of the home to my wife or vice versa.
We were wanting to put the loan onto our current home so that we could use at least half the loan for investment for tax deductions rather than all for the home we are going to be moving into to live.
Hi Sarema,
Jamie is correct. Spousal transfer is the way to go.
One spouse (Highest income earner) applys for a loan to purchase their spouses half share.
Purpose of the loan is to take 100% ownership and rent out as investment property.
Tax deductible loan and allowable by ATO. Stamp duty payable on transfer from one spouse to the other.
Remember to obtain a couple of R E agent market valuations of the former PPOR.
The spouse who received payment for sale of their 50% holding now uses that as deposit on the $850K
purchase of new PPOR in both names.
Regards
Sarema,
It doesn't matter that your loan is closed even if it was still open with redraw available the interest on the withdrawn money wouldn't be deductible if it is used for private purposes.
If your property is in VIC one spouse can buy out the other spouse at full market value without stamp duty. It will probably be CGT free if it was a main residence, depending on a few things.
someone sent me a PM asking me to comment with regards to borrowing and using a trust.
This wouldn't change things because if someone borrows money and 'invests' it in a discretionary trust the interest on the loan would not be deductible because with a discretionary trust there is no fixed entitlements so the person investing the money would possibly not get a return.
The property could be sold to a trustee and the interest could be deductible to the trust – which may not help a great deal if the trust has no other income but still may be worth considering. Stamp duty would apply though.
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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