All Topics / The Treasure Chest / refinance investment property -legal or not?

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  • Profile photo of nghia76nghia76
    Join Date: 2003
    Post Count: 1

    Can someone tell me if refinacing an investment property to get enough money to buy a house to move out is legal or not please?
    I have a unit, which initially is an investment property, then I moved in there after I got married. Now I want to buy a house to move into, but I’ve nearly finish paying off the unit and dont want to sell it. So what I’d like to do is to revalue the unit and take out an 80% loan (refinace) on it and use that to deposit a new house, then rent out the unit. But I am concern if this is an unlawfully act. I know you can refinance an investment property for another investment property- but this is slightly different.

    If anyone know about this, please tell me or let me know where I can get some info. Thankyou in advance.

    my email is [email protected]

    Profile photo of JoffJoff
    Join Date: 2003
    Post Count: 50


    From a legal point of view I dont think you have much to worry about.You are not actually selling your unit so CGT wont be due.This is just a simple refinance. Your accountant should be able to answer this for you over the phone.
    One thing I would say, be up front with all parties (bank/ accountants/solicitors) concerned as to your intentions/requirements along the way.There may be better ways of doing this than you are aware while still staying legal.

    Profile photo of nghia76nghia76
    Join Date: 2003
    Post Count: 1


    Thank you!


    Profile photo of SaskatoonSaskatoon
    Join Date: 2002
    Post Count: 112

    Hello Nghia.
    There should be no problem using the equity in your IP for a deposit on a house to live in. Note that the interest on the loan will not be tax-deductable, as the loan will not be for investment purposes.
    You should be able to increase the amount of the existing loan with your current lender, rather than refinance with another.

    Terence McMahon

    Profile photo of johndjohnd
    Join Date: 2003
    Post Count: 25

    Hi nghia76,
    Rest assured not illegal at all. Your only issue is tax, what you can deduct inrelation to your new transaction and your existing transaction. Check with your accountant how it should be structured to ensure maximised tax benefit.

    Profile photo of DNTSproDNTSpro
    Join Date: 2003
    Post Count: 5

    Hi Nghia76,

    For me..I will look into a descretionary trust and buy new property under it then rent to yourself…so your 20% deposite from your equity can be tax deductable!
    This is my idea only….please correct if i am wrong!


    Profile photo of JetDollarsJetDollars
    Join Date: 2003
    Post Count: 2,435

    let assume your current unit is $120k and you still owe $20k.

    80% of $100k is $80k will be use for deposit for your new home to live in.

    I believe this $80k deposit for your new home is not tax deductable because you are not using for investment purpose.

    But if you use this $80k for deposit for investment property then it is tax deductable.

    hey, I could be wrong.

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