Redraw conflicting advice

Hi westsub,
WHat I think I am hearing (reading) is that you wish to borrow against the IP to provide a deposit for a PPOR.

To many, a redraw means to ADD to an existing loan (i.e. you pay down a loan, then borrow it back via a redraw). In that case, only one loan exists. If that were the case, you would be mixing personal borrowings (for a PPOR) with the rest of the loan for the IP). That DOES create a mess.

However, if you were to draw on the Equity in the IP using a SEPARATE loan (for your personal purposes), then the original IP loan remains an investment loan, and is not “mixed with personal borrowings”.

Keep the loans separate and distinct, and there shouldn’t be a problem. But I am not an accredited adviser – so do treat my answer as opinion only. There are others on here who are accredited advisers (see their signatures) and can comment with authority,

Benny

I think you shouldn’t be taking tax advice from either a mortgage broker or a banker.

Cancel the redraw and Borrow against the equity in the IP as as a separate split, using this for the deposit on the new PPOR.
2 benefits
1) no contaminating of the loan
2) avoids cross collateralising securities

True

Some CAs are auditors etc and not tax agents.

Hi all,

sorry to bring up an old thread, I am also having the same question as the OP.

Currently I have an IP and about 6 months ago I have refinanced it thinking to purchase another IP, however things have changed and I am now looking to purchase a PPOR instead.

Current IP Loan: 350k
Current offset amount: 100k (including my savings)

Since the refinance, I’ve been putting all my savings into the offset account (to reduce interest).

So my question is that now I have my personal savings and money from the equity sitting in the offset account, will I be able to use all that 100k from the offset account to purchase my PPOR? or will I only be able to use what I’ve put in since the refinance?

Say if I am able to use that 100k from the offset, this will obvious increase the amount of interest I pay for the IP loan, will I be able to claim this extra interest as tax deductions?

thanks in advance!

Thanks terryw,

That is correct.. I had refinanced the loan and put the extra borrowed money into my offset account..

Is there a way to fix the contamination? It’s only been less than 12 months so if I look back into the offset account, I can easily determine how much I’ve been putting in since the refinance..

By the way, this loan+offset account is purely for investment only, so i have never withdrawn any money out from this account for personal spending.. I hope this can also make it easier to untangle the mess?

hi terry,

never knew what I’ve done by refinancing and parking the money in the offset would’ve created such a mess..

say if I am able to postpone buying my ppor for another year, can I now use my offset (borrowed + personal money) to buy another investment property instead?

if I can buy another ip without tax issues then hopefully after 1 year I’ll get some capital gains and I can refinance and split the loan on that instead.. I spoke to a friend of mine and he goes because my money is now contaminated, I may have issues.. I just want to be sure before I use that money to reinvest..

thanks again!