Hi,
I am not 100% sure about this. I have heard that in US, 100% property loan is possible using a 80-20 split option, which means that a person can take 2 loans instead of 1 (one for 80% of the value of the property and second one for 20% of the value of the property), this way no mortgage insurance needs to be paid or maybe needs to be paid on the 20% part of loan not 80% (or something similar).
I am not sure if both the lenders need to be same or they can be different.
Do we have such an option in Australia ?
If i buy a investment property then can i use 2 lenders to finance it in such a way that i save on LMI ? if yes then are they both tax deductible.
And, if i take some personal loan to pay my 5% (in case of 95% loan), then is the personal loan’s interest tax deductible ?
Finally, for being tax deductible, does the loan needs to be titled as mortgage ? what if someone pulls out some money from credit card or take a personal loan to pay 1 or 2 months installment. will that interest on CC/Personal Loan be tax deductible as well ?
Regards,
Nick.Cost of interest on 2nd loan > cost of LMI
2nd mortages are not that common in Aust
LMI is dirt cheap in real terms
Most banks will not allow you to take out a personal loan to fund the deposit for property. It’s a no-no as far as they are concerned, and I believe it may be against standard T’s and C’s
thanks for that,
but is such a personal loan etc tax deductible ?
Nick.
nick, that sort of sounds too good to be true!!
however, there is 100% and 106% finance available NOW. So no need to do sneaky things as per the numberous American guru (no pun intended PropertyGuru) books.
this also makes it pretty clean cut for your tax deductibility question.
cheers
brahms
[email protected]
BrisbaneHi Nick,
The interest on all the loans you outlined would be tax deductible against the income generated by the property.
The taxman applies what he calls the ‘purpose test’. If the purpose of the borrowing is to generate taxable income then the interest associated with that borrowing IS tax deductible.
You’d need to be careful apportioning the interest on any mixed-purpose loan. eg the credit card funding – so that you were only claiming that portion of interest that related to the income generating purpose. File your calculations along with your other tax working papers for that year with your file copy of the return.
Yes it is theoretically possible here, but nobody is going to lend your on a second mortgage over 80% LVR – except maybe a desparate vendor.
BTW, commercial second mortgages up to 80-85% maybe possible with rates from 12-26%.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
Thanks for all the help guys,
one more question:
If i take out a personal loan to pay Stamp Duty then would that be tax deductible as well (i mean interest paid on it).Thanks,
Nick.Nikunja
Originally posted by malik_nikunj:Thanks for all the help guys,
one more question:
If i take out a personal loan to pay Stamp Duty then would that be tax deductible as well (i mean interest paid on it).yes.
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