All Topics / Finance / Is it possible to increase the size of your current loan?

Viewing 13 posts - 1 through 13 (of 13 total)
  • Profile photo of brunowabrunowa
    Participant
    @brunowa
    Join Date: 2008
    Post Count: 27

    Hi,

    Is it possible to increase the size of your loan by taking out the equity in it? The purpose is to enhance tax deductions.

    For example, bought a place for $500k, and the property is now worth $600k. The loan has been paid down $300k. Is it possible to increase the size of the loan to 80% of 600k being 480k, so that I can get tax deductions on 480k interest payments rather than just 300k?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Nice try but regretfully not unless of course the additional borrowing is used for investment.

    Say you increase the loan by $100,000 and use these funds to invest in Managed Fund then YES the interest is deductible.

    If you increase the loan and have a great holiday then regretfully not.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    Qlds007 wrote:
    If you increase the loan and have a great holiday then regretfully not.

    Would be nice though :)

    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

    Yes it is possible. But the interest on the extra borrowings will only be deductible if they are used for investment purposes. in your eg the $180,000 – what will it be used for?

    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 brunowabrunowa
    Participant
    @brunowa
    Join Date: 2008
    Post Count: 27

    Damn that is quite annoying…

    The reason I asked the question is that my PPOR at the moment is the property where I have paid down loan to $300k, however I would like to buy a new PPORy to live in and then rent out my current PPOR.

    Is there a better method of doing this or is that extra $180k locked away in my current PPOR?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Pretty much locked away.

    You may be able to do something by a carefully structured loan to pay the expenses of your investmnet property, including the interest.

    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 Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    brunowa are you married or own the property jointly ?

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    This is why people are encouraged NOT to pay down their PPOR but to get an offset loan instead.

    I didn't know that when I started either but luckily we have stayed in our PPOR for a long time and won't use it as an IP.

    Profile photo of brunowabrunowa
    Participant
    @brunowa
    Join Date: 2008
    Post Count: 27

    Agreed Catalyst… I'm learning the expensive way!

    Richard, I am single and own the property in my name only.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Ok shame spouses have their use for times like this lol

    Altenative you could look to sell the property into a Unit Trust borrow 100% of the PPOR value and the entire interest would be deductible.

    Yes you would stamp duty and land tax would be need to be considered but depending on the numbers there could be a good monthly saving.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of itsandrewitsandrew
    Participant
    @itsandrew
    Join Date: 2007
    Post Count: 294

    Hi Richard,

    I am in a similar position and may be turning my PPOR into a rental next year.  How can spouses be of use?  Is it by transferring into one name?  I'm in Victoria where I think Stamp Duty is waived when property is transferred between spouses.

    Andrew

    itsandrew

    Go as far as you can see and you will see further.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Andrew

    What you can look to do is purchase your spouses interest in the property (Course depending on your marginal Tax rates she might end up purchasing your interest in the property) whilst it is a residential owner occupied property and then when the property becomes available for rent the interest becomes a deductible expense and can be claimed.

    Each State varies when it comes to Stamp Duty so check with your conveyancer.

    Most lenders would have no clue how to undertake the Loan Transfer and in many cases wont allow (Had a classic case this week where the Bank said NO because they couldnt understand it so the forum client phoned me and we have the application already pre-approved subject to a letterhead valuation).

    Drop us a line if you need some direction.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of itsandrewitsandrew
    Participant
    @itsandrew
    Join Date: 2007
    Post Count: 294

    Thanks for the that Richard.  Very helpful.

    Andrew

    itsandrew

    Go as far as you can see and you will see further.

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