Hi Guys
Ive been a long time reader, but never registered until now.
Anyway, this is my current situation. I currently have 2 IP and 1 PPoR.
Im selling my PPoR to move into one of my investment properties, which is stuck on a fixed interest rate until July this year. Settlement is in a week, however I have been informed that the original information that my broker and bank gave me about being able to make a permanent reduction on the fixed rate loan is not possible without paying out the loan (plus $15k fees) and creating a new loan.
I would keep the cash and wait until the fixed loan becomes variable again in July, however that leaves me exposed to mortgage insurance.
The alternative my broker has suggested is that I put the spare cash into my other IP, basically taking it down to a $50k loan. He then told me that down the track I can refinance this back to its original amount and put it back into my PPoR and still be able to claim tax breaks on the interest. I dont believe this is true – can anyone verify.
The other question I have is, if I do pay to break the fixed rate loan, can I claim that on tax as it is managing the investment loan I had, to convert to a loan for a PPoR. The more I thikn about this, the more I think this is the way to go
Thanks for any advice anyone can offer
Kurt
Or is there another way I can keep my left over cash from the sale of my house somewhere other than these two loans, keeping me out of mortgage insurance territory until the end of July so I can just dump it in the new PPoR?
It would be a shame to put all my money into the IP and then have to sell it off later.
thanks
I dont believe this is true – can anyone verify.
Yes you are correct you cannot. Love Brokers giving Financial planning advice when they are not licensed.
Richard Taylor | Australia's leading private lender
Why don't you talk to your bank about putting enough of your spare money down on a term deposit as additional security so that you don't need to pay LMI
Qlds007 wrote:I dont believe this is true – can anyone verify.Yes you are correct you cannot.What about if the loan allows redraw. Im on a minesite and one of the accountants here said it is legal, although he's been out of income tax for a few years now.
With regards to the term deposit option – I did think about that. Would that help keep my LVR below 80%? If so, that is probably the best option!
Just because it may be legal doesn't make it legal at all. (laws are interpreted by the tax office and courts)
If you redraw the money and then try to claim it as a tax deductible loan you will
most likely have to explain at your requested tax audit as to
why your investment loan has suddenly increased
and
how the purpose of the funds have not been used fpr paying down a private loan for a PPOR use.
and that you are not engaged in a scheme to avoid paying tax
as their is legislation that pertains to whether a person has planned an action to avoid paying tax.
see this tax ruling at point 22 and point 24
http://law.ato.gov.au/atolaw/view.htm?Docid=TXR/TR20002/NAT/ATO/00001&PiT=99991231235958I have completed tax law and a commerce degree but I am not licensed to give specific advice or gained a job in it .
Thanks everyone for your advice. I spoke to the bank and they will let me do the term deposit option. Upon maturity I can dump the money into my PPoR – and it leaves my IP loan as is…
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