Tax deduction on borrowings from family

Hi All!

Hope all is well nearing the christmas break.

For ACCOUNTANTS or anybody else who has had a similar problem...

So I am looking to buy my second property, and a potential bargain property has appeared out of the blue for me,
Unfortunately it is an auction property (ex-housing comission) and the auction is on Monday.

I will be overseas as of Saturday (just get's better) so will be struggling to find a lender who allows power of attorney to a third party (or so my mortgage broker says).

I have the money required to buy it outright, and thought I may refinance straight after to avoid lender issues nearing the christmas period. However I was informed I am unable to obtain tax breaks if I refinance on a property paid in full.

Now i'm thinking if I have a legal borrowing agreement from my parents in order to "borrow" the funds so I can claim the tax deductions afterward.

Any thoughts on how I can organise all this in the next 2 days?

Regards
NHG

1. it be hard to geared the amount your after if it's paid in full - as it wont be considered a "purchase" or a "STRIGHT refin"it be considered as cash out...
2. Can be tax deductible as long as it's a IP to start off with and doesn't change during the transition period.
3. Lenders do accept power of attorney- just a matter of speaking to the right ppl from credit who has done this before

If anything speak to the agent before auction and ask for a "Extended" settlement period if you win!

Regards
Michael

Michael Chan ----- Finance (Mortgage/Commercial) Broker----
Michael@Shapehomeloans.com.au | 1300 SH LOAN | 1300 74 5626 | Fax: 02 8212 8909|
Same Bank. Better Rates. Served With A Passion.

Hi NHG

Sorry i cant believe your Broker is telling you he cant find a lender who wont accept a Power of Attoney.

You are not the first person who has ever gone on holiday during the buying process and trying to secure a mortgage at the same time. Dealing with an absentee buyer and having to do everything on is own is standard practise for Brokers.

If the Auction is Monday he has plenty of time to get everything from you to process an application.

As long as you can have someone who can bid on your behalf finance and settlement shouldnt be a problem as it would normally be a 30 day Settlement.

As a closing note remember we Brokers also deal with non resident clients and they never live in the Country.
Everything is done by mail / email etc and this includes the application, signing documents etc.
I am assuming you are not going deep in the African jungle and cannot be contacted for the next 4 months.

Cheers

Yours in Finance

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.
Want to live of your rental income? 0-40 properties in a decade. Email me for a copy of my API Magazine interview

Thanks for your prompt response guys!

Richard I have PM my mobile number, would love to have a chat, perhaps there is something you could do.

Regards
NHG

You're right in that you cannot borrow from yourself. You can borrow from third parties and the loan would generally be deductible and you could refinance it with another lender. Just need to make sure you have a written loan agreement and set it up properly.

Perhaps a discretionary trust would be the way to go rather than family.

In the past I have had problems with CBA when trying to sign loan agreements with a power of attorney - they refused to accept them because of privacy concerns - the attorney would see what the donor's financial situation was and also potential problems later proving that the borrower did not understand their obligations. Under the Power of Attorney Act an attorney can bind the donor and basically enter into any agreement that they can legall enter (subject to any restrictions in the deed) but there are no requirements for others to accept them.

In the past I have had luck with ANZ and Westpac.

Regards

Terryw

Thanks Terry!