Hi all
Due to work i am looking to rent in another location.
I am considering turning my PPOR into an IP. while i am renting
-Has anyone done this and if so whats the process do i have to notify the bank or broker etc
-do i have to redo the loan on the property.
-Do i have to get it valued again
-any particular way to set this loan up and in particular to the consideration that i may want to buy another IP. Interest only of course.Anyone offer any experience here..
cheers
SGHi Star G
What you are wanting to do is fairly common however a bit of care needs to be taken in order to ensure achieve the maximum return out of this decision.
They are a few variable and your mortgage broker should be able to assist with these if he is experienced in investment structures.
Difficult without additional information to make an open recommendation.
Richard Taylor | Australia's leading private lender
you will want to get it revalued so that you can prove the growth in the property while it was your residence and get in CGT free. any growth in the period it is being rented out if liable for CGT. you can rent it out for upto 6 years with it classed as you PPOR.
If not allready you can change your loan to I/O, then claim it on your tax. Tell the bank what your doing and they will be more than helpfull.
here is an article from the age, it is ment to help families but you are in the same position
http://www.theage.com.au/news/property/home-in-on-tax-lurk/2008/07/28/1217097144054.html
Hi
Thanks for the replies.
I wasn't sure what information would be required. Qlds007 what info would help for a more informed response.
cheers
SGSG
Is the loan P & I / IO, fixed or variable and with whom. ?
Will you buying a new PPOR in the near future or renting for a while ?
Do you have any other non deductible expenses ?
Richard Taylor | Australia's leading private lender
Hi Qlds007….great name that it took a while but if twigged…lol
Is the loan P & I / O, fixed or variable and with whom. ?
The loan i have is an I/O loan and is variable at this stage. I have a relatively small mortgage. House Val $380,000 loan $85,000
Can rent at approx $320 a weekWill you buying a new PPOR in the near future or renting for a while ?
I don't think so i am looking at renting. Reason for not buying a PPOR at this stage is because i would have a large Non deductible debt so i would say i would be better of selling my PPOR if i was to buy another one for myself. Also the numbers look better by me renting.
Do you have any other non deductible expenses ?
i only have a small LOC that is around $20000 just in case type of thing.
So Current PPOR val 380000 Owe 85000 and LOC 20000 NON DEDUCTIBLE Have a LOC investment account attached this is deductible interest.
Also have an IP Val $450000 owe $250000 Have LOC set up but not used yet this would be tax deductible.
Rents $420 a week
hope this helps
cheers
SG
Hi SG
Ok all looks ok.
On the basis that the LOC non dedcutible debt is not drawn at all get your lender to link a 100% offset account to the IO loan and have all of the rents and your salary going into this account.
Drip feed the monthly interest repayments on the 2 IP loans from here.
As mentioned earlier ensure you get your place valued even a real estate can do you a market valuation on letterheading.
With your next IP make sure the loans are not cross collateralised just to keep things nice and clean.
If you do decide to buy another PPOR and want to retain the current PPOR look at selling property into Trust with you as the Trustee. This will shift the burden of debt from non deductible to non deductible.
Richard Taylor | Australia's leading private lender
Hi SG
Ok all looks ok.
On the basis that the LOC non dedcutible debt is not drawn at all get your lender to link a 100% offset account to the IO loan and have all of the rents and your salary going into this account.
Drip feed the monthly interest repayments on the 2 IP loans from here.
As mentioned earlier ensure you get your place valued even a real estate can do you a market valuation on letterheading.
With your next IP make sure the loans are not cross collateralised just to keep things nice and clean.
If you do decide to buy another PPOR and want to retain the current PPOR look at selling property into Trust with you as the Trustee. This will shift the burden of debt from non deductible to non deductible.
Richard Taylor | Australia's leading private lender
On the basis that the LOC non dedcutible debt is not drawn at all get your lender to link a 100% offset account to the IO loan and have all of the rents and your salary going into this account.
Hi again this is interesting i was under the impression that the rents had to go to the account that is used to pay the loans etc.
Currently this is from the Investment LOC this pays the loan and the rent goes into here. Would the ATO question that the rent money is not going into the account that is paying the Loan interest.
The val on my PPOR was very recent.
Cheers
SGDrip feed the monthly interest repayments on the 2 IP loans from here.
When you say drip feed what do you mean pay the interest bit by bit or as a monthly total.
Cheers
SGSG
No you can deposit your rent and salary into any account you like.
Just make sure that the funds offset the interest you are being charged on the IP loan.
Always best to keep the 2 account separate to avoid any ATO issues.
With regards to drip feeding i merely meant that you want to have the interest charged on the 2 IP loan account coming out of the offset account once a month.
Richard Taylor | Australia's leading private lender
Hi again
Thanks for your replies Qld007 appreciate this
Just to be sure here:
Current.
Mortgage Loan Interest on PPOR is paid by my wages
Have a savings account/Offset set up for PPOR mortgage loan.
The LOC for personal use is half drawn
My wages pay for my:
PPOR interest
Personal LOC interest
Inv LOC interest as i have bought shares with this and incurring interest but do no want it to capitalise.
My wages go into the Offset account .The IP
Have the Mortgage Loan
The LOC not drawn at this stageWhat my thoughts are and i could be wrong:
With a LOC if i buy another IP and there is a shortfall the LOC picks it up and so may capitalise slightly.
If i have a OFFSET a/c then if there is not enough in there i may get caught.I am looking at this incorrectly?
Cheers
SG.Hi Again SG
Sorry i think i might have misread a earlier reply.
I was under the impression that the LOC for your personal purposes was not drawn at all. If this is not the case the convert this to a P & I loan and link the offset account to this loan and not your IO loan on the same property.
Make sure that the loan for personal purposes is totally separate to the loan for your shares.
Have ALL of your income going into the offset account liked to the separate P & I loan which you used for personal purposes.
Then each month have the interest for the other loans coming from the offset account.If this is still not making sense shoot me a quick email and we can take it off forum.
Richard Taylor | Australia's leading private lender
I would suggest, if you have any LOC equity left, to look at borrowing any expenses from this account while putting all of your hard earned cash into the 100% offset account. This is assuming the LOC has been used for investment purposes. May may also wish to talk to your accountant about paying the IO loan interest from this account.
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
Hi
see how i go this time otherwise an email maybe a good idea..lol You have thrown me a little bit.
I was under the impression that the LOC for your personal purposes was not drawn at all.
No problem this is the LOC that has a LImit of $25,000 sorry not 20,000 as i mentioned before.
So the mortgage is for $85000 this is the home loan interest only variable with offset account
The LOC( A) is seperate account and is split this one for personal with a limit of $25,000 with $15000 drawn So still have $10,000 if needed
The LOC (
is for investments so tax deductiblleIf this is not the case the convert this to a P & I loan and link the offset account to this loan and not your IO loan on the same property.
If you are suggesting turning the LOC (A) to a P&I loan linked to the offset could you explain your thinking here as i cannot see why i would do this. Don't think i would get a P& I loan for $25,000To my understanding $85000 is the amount that i can claim interest on i cannot increase this?
Make sure that the loan for personal purposes is totally separate to the loan for your shares.
Yes i am aware of thisHave ALL of your income going into the offset account liked to the separate P & I loan which you used for personal purposes.
Yes understand this but refer to previous query re P&I loan.See how we go this time..lol
cheers
SGSG
All about right this time
If you are suggesting turning the LOC (A) to a P&I loan linked to the offset could you explain your thinking here as i cannot see why i would do this. Don't think i would get a P& I loan for $25,000 – Yes i would suggest this.
To my understanding $85000 is the amount that i can claim interest on i cannot increase this – CorrectRichard Taylor | Australia's leading private lender
If you are suggesting turning the LOC (A) to a P&I loan linked to the offset could you explain your thinking here as i cannot see why i would do this. Don't think i would get a P& I loan for $25,000 – Yes i would suggest this.
Ok i understand but would the bank do this for the small amount?
If you are tired of responding to this no problem i understand thank you very much i have learnt something i didn't know i could do re: P&I.
All the best
SGHi SG
No never get tired ask as many questions as you like.
Yes depending on who your lender is there would be no problem in a loan of that size.
Richard Taylor | Australia's leading private lender
Hi SG
No never get tired ask as many questions as you like.
Yes depending on who your lender is there would be no problem in a loan of that size.
Richard Taylor | Australia's leading private lender
OK Qlds007
Have a question.
Lets say the structure you indicate is set up. The rents wages etc are all going into the OFFSET account which is linked to the P&I loan.
Lets assume just for the exercise that for a period of say 2 months both properties are vacant due to whatever eg high vacancy rate say.
Now i only have a wage going into the OFFSET account but no rents which will be a problem not enough to pay the interest on both properties.
With a LOC you would have this BUFFER to cover you.So if the structure was set up as you indicate and the scenario that i have indicated does unfold can i use another LOC account that is for investments to make the payments to the IPs whilst waiting for the properties to be rented.
Hope that explains it ok.
Cheers
SG
is for investments so tax deductiblleYou must be logged in to reply to this topic. If you don't have an account, you can register here.
