Hi all,
I have a question that i would like some advise on if anyone can help.
I have purchased my PPOR last year 2002 and still owe money on it however i have equity in other properties that could be drawn upon to enable me to pay off the balance owing on my PPOR.
Would this be a wise move or is it just a personal stability thing?? [^]Not a wise move from a tax perspective as the interest would not be tax deductible. But if you could get clear title on your PPOR, they should give you peace of mind at least.
Terryw
Discover Home Loans
North Sydney
[email protected]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
Hey bigben
Yeah sure sounds like a “personal stability thing” as you put it. As Terryw says I don’t think it would be a good move financially.I know how you feel though and I have done some things that aren’t the best financially but make me feel better. What price personal peace? All you can strive for is a balance I think.
Best of luck
NamastéHi BigBen,
If the debt on your PPR is causing you to have sleepless nights, Maybe a fixed rate will help ease your concern,
Or the use of an offset facility to pay down your PPR debt at a faster rate may be another option,
Kind Regards
Steven.[email protected]
http://www.mobilemortgagemarket.com.au
Ph: 0402483216As terry said, not a wise move as you lose the tax deductability of the loan.
However I would look at paying minimum/fixing the investments and trying to pay down the ppor loan down first. I’ts intrest isn’t tax deductable.JOsh
Hi all,
Some interesting posts here. I’m not sure how refinancing your IP’s to pay down your PPOR can be a bad thing, unless it would upset the taxman. Here’s a fictional scenario…
~~~~~~~~~~~~~~~~~~
I have a PPOR and owe $100k. I also own an IP which I purchased for $100k (80k loan) and is now valued at $200k. I believe that the market has peaked in the area where my IP’s are so now is the right time to suck as much cash out of them as possible.Repayment details are determined using the calculator on realestate.com.au assuming 7.5% over 25 years.
Repayments for the PPOR are $739p/m.
Repayments for the IP are $592p/m with $500p/m being for interest.Total payment is $1331p/m
If I refinance the IP and redraw $80 which I then put directly on the PPOR loan. I now owe $20k on the PPOR and $160K on the IP
Repayments on the PPOR are now only $148p/m.
Repayments on the IP are now up to $1183p/m with $1000p/m in interest.Total payment is still $1331p/m but I’ve doubled my interest expense on the IP loan, putting an extra $6000 in my pocket come tax time.
~~~~~~~~~~~~~~~~~Is this a reasonable scenario or would the taxman give me a kick to the ass?[
]Cheers,
MikeHi Mike,
Not my forte, but what you wrote sounds good in theory, but the money you borrow is not for investment purposes and the ATO would most likely challenge this. If it was this easy then everyone would be doing this. If I’m wrong then someone please jump in.
C2
“Is it true the more you owe the more you grow until the bank steps in?”Tax deductabilty depends on the purpose of use of the money. As TerryW says above, you would lose this deductability status.
Rubbachook (nice name), I think you don’t really lose the tax deductibility, but rather don’t get any extra, you should still be able to claim the interest on the original loan amount for the IP, but not, as C2 suggested, the increased amount as the purpose on increasing htis loan was to pay not business related debt. (gee that was a long sentance!)
Terryw
Discover Home Loans
North Sydney
[email protected]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
Mike
You won’t get any extra tax back as the others suggested, and if you try, the taxman will come down on you like a tonne of bricks.
However, I noticed that your IP is P&I. While you have PPOR debt, I would definitely change that back to IO, then you’ve got an extra $92pm to go off your PPOR. An extra $1000 per year would certainly make a dent.
Cheers
MelThans All,
Well i think by the sound of it that i will be better off just leaving things run as they are for the moment and i will only refinance if down the track money gets tight.
Tax man has me by the short and curleys![]
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