All Topics / Help Needed! / Using equity

Viewing 5 posts - 1 through 5 (of 5 total)
  • Profile photo of melbinvestormelbinvestor
    Member
    @melbinvestor
    Join Date: 2013
    Post Count: 1
    September 30, 2013 - 6:05 am

    Hi there,

    I'm keen on understanding what restrictions exist, if any, regarding using equity in your investment property to pay off your principal place of residence.

    I'm looking to refinance my investment property to approx 80% of the value which will give me approx $50k. Will the bank and ATO allow me to move these funds into an offset account or to put these funs into my PPOR?

    I'd prefer to obviously make a bigger dent in my PPOR.

    Not sue what the restrictions are around doing this type of things.

    Any help or guidance would be appreciated.

    Cheers

     

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    September 30, 2013 - 6:22 am

    Hi there

    Welcome aboard.

    You can't do that in order to boost deductible debt and lower non deductible debt.

    There's a "purpose test" that is applied to loans to determine whether it's deductible or not – if the purpose is investment related it's deductible, if it's not investment related it isn't. The purpose here is to pay down your PPOR debt – therefore the increased borrowings against your IP won't be deductible.

    cheers 

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    September 30, 2013 - 2:06 pm

    Sure, they would allow you, but would it be deductible? No.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of PLCPLC
    Participant
    @plc
    Join Date: 2012
    Post Count: 400
    September 30, 2013 - 2:27 pm

    Hi melbinvestor,

    As Jamie mentioned, unfortunately it won't make any difference to the deductibility of the loan and in fact could make your existing loan worse off if you tried to do it.

    If it was as simple as you were contemplating, everyone would have their PPOR's paid off and their investment loans maxed out.

    Cheers

    Tom

    PLC | Phoenix Loan Consulting
    Email Me | Phone Me

    Melbourne based Mortgage Broker | Making Finance Simple

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338
    September 30, 2013 - 2:56 pm

    You could do it but it would be of no benefit and depending on the rate of the IP v the PPOR plus fees and charges to set up you would likely be worse off!  

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

Viewing 5 posts - 1 through 5 (of 5 total)

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