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You cannot take out equity, all you can do is borrow money. You can do this by using the property as security for a loan and borrow the deposit and stamp duty etc for the new property. But the interest will not be deductible because the deductibility is determined by the use of the borrowed money – which isn’t income producing in this case.
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
They are statements not questions
but
1. No that is not correct
2. No that is not correct – loans have no bearing on CGT
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
It is generally the contract dates – but not always.
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
It is possible, but something you should seek specific legal advice on.
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
but is there any further reduction based on the first 5 years when I lived in the property?
Yes, it could be either
a) cost base reset to the value at date first income producing
or
b) above plus using the 6 year rule and apportioning.
seek tax advice
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
It will depend on the circumstances, such as, if PI or IO, what the expenses are, how long left on the loan, type of property, type of tenancy, yield etc
Assuming PI residential rate with minimum expenses it would probably neither improve nor decrease serviceability
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
Didn’t a lot of investors recently lose large amounts of money by investing in companies related to this group?
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
Steve, you have confused terms here or conflated ‘borrowers’ with ‘mortgagors’.
Mortgagor is the one who gives a mortgage
Borrower is the one who borrows the money
usually but not always they are the same
e.g husband owns the property and husband and wife go on the loan. Husband is the mortgagor and both are the borrowers.
You cannot be a mortgagor without being an owner – it is impossible to mortgage something you don’t own. A mortgage is the security for the loan.
A guarantor is one who provides a guarantee. There are 2 types
a) security guarantee who the guarantors property is used as security. parental loans where the parents property is used as second security for the adult child’s loan so that no deposit is needed.
b) Income guarantee. These are only allowed for company borrowers and spouses generally. A new company has no income so when it borrows the lender will rely on the income of the guarantor – which will be all directors usually.
A guarantor is only liable for the debt if the borrower defaults.
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
Why would a ‘bank’ be interested in reading a link to an article?
What are you trying to show them? And Why?
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
That can work out well in limited circumstances, but in these days of low interest rates the trust would soon make a profit on the property that it rents to you and that income would be taxable income where it otherwise wouldn’t had you bought in your own names. Also have to factor in land tax on trusts if buying in NSW and VIC, plus the estate planning aspects.
Seek legal advice before trying it.
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
Does it matter..?
Yes, a potential conflict of interest. What if something pops up with the property and it is something the buyer’s agent should have picked up or that they caused will the settlement agent tell you or down play it?
You should use a lawyer, a solicitor, to protect yourself and to get some legal advice as well as transferring title.
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
beware as accountants cannot advise on land tax as it is state law and doing so would be providing legal advice for which they would not be covered by insurance. This is the case also when they set up trusts.
In WA a trustee of a discretionary trust could get a separate land tax threshold to land they hold beneficially (not as trustee).
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
That will depend on the circumstances such as where the land is located and alternatives. There could be less land tax with using a trust to hold property, the same or more.
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
That is true, there are many advantages with cheaper properties, others include being able to sell and minimise CGT as you can sell one property per year and spread the gain.
I think the name of the game is to make as much money as you can rather than make a job. Expensive ones might have low yields bu they can result in more money. One of my clients purchased for $2mil and sold for $3mil less than a year later. No 50% CGT discount (they were silly there) but still would have made $500k+ plus in one year. Beats owning multiple cheapies in my book.
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
The first thing to do would be to try a different lender.
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
You have to consider whether such a property is a good investment. Just because it is high yield it doesn’t mean it is good.
It will still tie up serviceability and equity and you could be investing in something else with higher returns – there is an opportunity cost.
Regional areas do seem to be growing though so there may be some capital growth. But is this a short term thing or not?
Also having say 10x $200,000 properties will have 10 times the issues of 1 x $2mil property. Think of all the broken hotwater systems, smoke alarm checks etc.
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
disagreements, affect on serviceability, one wanting to sell, being liable for the whole debt, death, stamp duty if one wants out, family law disputs etc.
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
that a lender is only allowed to let you borrow up to 30% gross of work salaries at their determined interest rate. Ie you may have a 3.99% on the loan but the assessment may be on 6% and they may allow you up to 80% of the IP income.
Its a bit more complex than this but very rough this is the case. Lender calculations are hidden behind the scenes though. They will also use living expenses worked out on the higher of what you are spending or one of the spending indexes.
In most cases borrowing capacity is only 6 to 8 times the borrowers pretax annual income. If you earn $100,000 pa you would be limited to $700,000 – very rough
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
If you don’t qualify to borrow then you won’t qualify to guarantee…
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
Don’t believe everything you hear is the first thing.
Second thing is that lending tightened up significantly in 2009 when the NCCP Act came in and again in around 2017 when APRA started trying to cool the market down by curbing lenders. So ask the people when they acquirered their properties.
If you have already tapped out it might be too late, but if you had companies borrowing you could have extended further by not being the borrower but the guarantor.
And some non-bank lenders will have easier servicing so has your broker tried the firstmacs, resimacs, pepper and liberty?
And it is not how many you own that counts. You could sell your main residence and buy 16 more cheap properties potentially. But this may not be a good move.
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