Hi there,
I own an investment property (I live at home with parents), and was wondering what is the best course of action regarding my excess income (i.e. the income I have left over after paying the mortgage and lifestyle expenses etc). I could put it into one of them St George dragonsaver accounts, which pays 5.25% interest p.a. OR I could put all the money into the mortgage for my investment property (I can always re-draw it if I need to).
However, putting money into the investment loan might reduce the amount of tax deductions I could make on that interest… will the benefit of reducing tax-deductable interest outweigh the benefit of having taxable income generated via the savings account?
Thanks!
MalMaybe – your in a position to buy another investment.
Be very careful with redraw.
When you redraw it you are creating a new loan. Depending on what you redraw it for the interest may not be deductible.
So if you are saving in your IP mortgage and you redraw for a home, a car, a holiday etc then that part of the loan wont be deductible.
Offset is much more useful here.
Let me know if you need more info.
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi guys,
I certainly will be considering another investment property, always on the lookout
But what to do with my savings in the mean time… by re-draw I mean, I put all my savings into my loan account (on top of my normal mortgage repayments), and when I need to use that money (i.e. as a deposit for another investment property) I just withdraw what I put in.Is that better in terms of tax for an investment property, i.e. to keep my savings in the loan account, or is it better to keep that money in a high interest bearing account, like the St George dragonsaver?
Thanks,
MalAs mortgage Hunter intimates
1. If your going to use this savings for further property investment purposes then put it on the redraw. There is no problem redrawing as the purpose for borrowing is for investment purposes.
2. If you want to use the savings for a PPOR, then you are better off putting it into a savings account. That way there is no conflict between what the purpose of the money is. For your PPOR (which is not tax deductible) and investment loan.
Have you got a 100% offset account linked to the IP loan? that would be another option.
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
It seem to me that you have a fair bit of money laying around so why not go and buy an IPs and use that as a deposit. If you don’t have enough then you can alway use the equity of your 1st IP.
You mention that you got IP therefore I believe you can put the rest in there to reduce the interest instead of getting 5.25% pa. When time is neded then you just redraw it.
Warm Regards
ChanDollars
[Keep going, you’re on your way to financial freedom]
But what to do with my savings in the mean time… by re-draw I mean, I put all my savings into my loan account (on top of my normal mortgage repayments), and when I need to use that money (i.e. as a deposit for another investment property) I just withdraw what I put in.
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