Hi All,
Very new to this forum stuff so I apologize if this is a question that has already been answered.
We have been married for 7 months now and have a PPOR loan $535K with $200K in an offset account.
I have an IP loan of $200K that is $50K ahead in repayments(should have kept it in the offset account but you live and learn) I have arrested the repayments until this amount has been consumed. The repayment amount is being channeled in to the PPOR offset account.
My husband has a fully paid off house worth $300K with a net rent of $240/week. This is deposited into the PPOR offset account. he also has a townhouse in QLD worth $350K. This has a loan of $100K with repayments currently at $395 per week. The net rent on this is only $200/week (management fees and strata fees are ridiculously high).
We were wondering if we should renegotiate the QLD IP loan to reduce the repayments by extending the term? Does anyone know if there are any tax implications on extending the loan? We are also considering selling the QLD property to pay down our PPOR loan and then start again with a IP in both names in a growing area.
Thanks in advance for your help
Julie
Hi Julie
Firstly welcome to the forum and I hope you enjoy your time with us.
If your IP loan is P & I and you are looking to switch it to Interest only then there is no Tax implications at all however if you are asking can you refinance your IP and increase the loan and use the increased funds to pay down you PPOR then the answer is no.
If you don't wish to sell the Qld IP there is nothing to stop you buying the property from your husband or alternatively look to sell it to a Unit Trust.
Yes there will be stamp duty and possible CGT payable but the net funds could be used to pay down your PPOR debt.
You certainly have a decent start to your asset base so with some careful structuring and the correct guidance on your next few acqusitions you should be able to start build some good equity over time.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
You should be paying IO on all loans untill your PPOR is paid off or untill you offset account is equal to the loan. Extending term wont effect tax.
What did you mean about arresting the repayments above? If you have stopped making repayments and are letting the loan increase then you could be in dangerous territory and should seek tax advice on this.
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 Richard and Terryw,
Thank you for answering my questions so quickly.
Richard-
What would be the advantages of my husband selling the QLD IP to me? In the beginning of the PPOR loan discussions we asked if we would be better selling all the properties to each other to the value of the PPOR loan. The answer we got was that we would break even at the 10 year mark with interest saved but stamp duty paid. I was reading somewhere that each state is different with their laws and I'm sure I read that there was no stamp duty in Vic if the sale is between spouses. The other 3 properties are in NSW so not sure if that makes a difference.
Also what is a unit trust- that is something I am not familiar with?
WIth the loan restructure we will not be borrowing more money just seeking to reduce the repayments to the net rent or below. I don't see any positives in adding money to the QLD IP loan when we still have our PPOR loan over our heads.
Terry-
By arresting the payments I mean that I am not making any payments on the loan. The bank have said this is OK due to the amount the loan is ahead. I thought it was the best way to access this money in a clear and transparent way. I didn't really think of the tax implications. Is there any other tax advantageous way to access this money or do I just live and learn and start the repayments again. My other thought is if my accountant is aware then we do not claim negative gearing for this period?
Finally another question – would it be better to sell the QLD property or because we have so much equity in it is it better to restructure the loan? Does anyone know how much the property management fees are in QLD. We currently pay 9% as well as strata and yard maintance. They are on site managers who are also real estate agents who offer to sell the property for you. Something doesn't feel quite right about the situation especially as this morning we have received an email stating why they are better than an external agent managing the property.
Thanks again in advance
Julie
You could possibly borrow to pay non interest related expensese. Capitalisimg interest is generally ok under tax law but the ato have said they can deny the interest if it is being done with a dominant purpose of paying off your home loan sooner.
There are no stamp dutu concessions in nsw for the sale of an ip to a spouse
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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