investment loan vs home loan

Hi,

I'm considering to buy a new house using a standard home loan..

but just in case i need to go overseas and I want to rent it, is it possible to switch my home loan to become investment loan in 

order to gain tax advantage?

Hi Hans,

A "normal" home loan is where you pay principal and interest. A "investment" loan is interest only as you can only claim the interest charged as a deductible.

As for ease of switching between the 2 - I'm not sure. Hopefully "olds" or "terry" will pop in to clarify.

Hope that is of some help?

Cheers Maree

There is no such thing as a 'normal loan'.

You can have an interest only loan on the house you live in, and you can pay p+i off your investment property.

Just based on the very basic summary you have provided, it would probably be suitable to structure your loan in the following way.

Take out a competitively priced loan with an offset account, and try for something with minimal or no ongoing fees.
Put your income and any money you are saving for the trip in the offset, which will reduce the interest you pay on the loan.
When you dacide to go for a trip, you don't need to do anything with your loan. You do not need a different kind of loan. The bank will just continue taking payments from you (presumable from the offset account)
The Tax deduction is worked out (hopefully) by your accountant. Once the property is rented out, and being used for investment purposes, you can claim the interest that the bank charges you. You will also need to disclose the rental income on your tax return, and you will be well advised to get the place valued in order to make working out your CGT obligations easier.

If you would like clarification on any of these ideas, or if you just have further questions, please feel free to shoot me an email and I will be happy to go over it with you.

Have a good one.

Tim O'Shea
Mortgage Plus
tim@mortgage-plus.com.au
0419774487
Residential, Investment, Commercial, Development and Non Conforming Finance.

Hi Hans

Firstly welcome to the forum and I hope you enjoy your time with us.

Flexibility is what you are after in any loan as i tell all of my clients because what starts off as one loan down the track changes exactly as you have indicated and there are both costs and Tax implications in getting it wrong

Why not approach an independant mortgage broker and tell them what uou are after and let them do the running around for you.

Will cost you nothing and you will end up with the correct product and structure.

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Thinking of buying your next investment property using a SMSF. Email me for a copy of my SMSF EBook.

thanks for the reply..

just in case i decide to go with the investment loan, is it still possible to get first home grant?

Hans

Yes buying an invesment property first does not preclude you from qualifying for the FHOG down the track when you come to buy your own PPOR assuming all other conditions of the Grant are met.

Of course if you go to Contract on your PPOR after 1 July 2009 then the Grant could be back to $7000.

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Thinking of buying your next investment property using a SMSF. Email me for a copy of my SMSF EBook.

According to the current rules, you can own 10 investment properties and still be eligible for the FHOG. The great is to assist with the purchase of your firsi owner occupied property.

There is essentially no difference between an investment loan and an owner occuspid loan. It just comes down to your own actions. If you claim the interest charged by the bank as a tax deduction, then it is an investment loan. You decide if it is an investment loan, not the bank.

Tim O'Shea
Mortgage Plus
tim@mortgage-plus.com.au
0419774487
Residential, Investment, Commercial, Development and Non Conforming Finance.