Hi everyone . I have a question regarding the situation i am in ….the following conditions apply to me .
1 . I currently own a townhouse worth 340 k i owe 70 k on it
2 . My sister own a house worth 430 k which has a self contained flat that my elderly father is living in . She is relocating to Melbourne and i want to buy it from her at this price so my Father can stay in the self contained flat and i can care for him .
3 . I can receive 350 p/w rent from my townhouse and my Father can pay , after rent assistance etc 200 p/w
4 . I would prefer to keep my townhouse rather than selling it ….it is in a very good area and i would like to hang on to it .
5 . On my salary it would be difficult to service both loans , however it is achievable if i can take out an interest only loan ( lower repayments ) on both properties …..i;e 500 kSo my question is …..is this a possible solution to my dilemma , what are the options besides selling one and buying the other , are there any risks , maybe its a good solution in my circumastances …single / no kids .
Many thanks and have a great day !
Hi Pappy
If i have it the right way around you would move into the new house and rent out your current PPOR.
Only problem you have there is that the interest on the new loan will not be tax deductble whilst your current townhouse will be positvely geared and the net rent after expenses together with the income you receive from your father will be added to your income and taxable at your highest marginal rate.
Depending on the actual figures you could look at selling your current Townhouse to a Trust structure , borrowing 100% of the current market value and use the net loan after repayment of the $70,000 as deposit on your new property.
This converts the non tax deductible debt into tax deductible interest although as mentioned all of the information is required to make a worthwhile comment.
Stamp duty will be payable but again depending on how long you intend to stay in the new home will determine whether the exercise is worth it.
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Hi PappyIf i have it the right way around you would move into the new house and rent out your current PPOR.
Only problem you have there is that the interest on the new loan will not be tax deductble whilst your current townhouse will be positvely geared and the net rent after expenses together with the income you receive from your father will be added to your income and taxable at your highest marginal rate.
Depending on the actual figures you could look at selling your current Townhouse to a Trust structure , borrowing 100% of the current market value and use the net loan after repayment of the $70,000 as deposit on your new property.
This converts the non tax deductible debt into tax deductible interest although as mentioned all of the information is required to make a worthwhile comment.
Stamp duty will be payable but again depending on how long you intend to stay in the new home will determine whether the exercise is worth it.
Thanks Richard , Yes i would live in the House and rent out my current PPOR , probably would stay in the house for no more than 5 years and the sell it and move back to the townhouse …….maybe the house will increase in value and i would be better off ? Cheers
Interest only option is usually chosen when you just basically buying time than buying the property itself.
If you think the property growth over years is higher than the amount of interest you pay during the time then interest only option is good.
But if you are planning to own the property one day then paying principal early on would be better.
If the property growth is lower than amount of interest you pay then I think dont buy it. just rent.
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