- savanahmp2401Member@savanahmp2401Join Date: 2011Post Count: 8
Just basically want to get some advise wether there's an advantage (financially) having your home rented out to help payout mortgage but at the same time i''m also gonna be renting due to work and school commitment. travel is one of the main concerns but didnt want to sell the house.
You will be able to claim expenses on your house (including interest on mortgage repayments, council fees, insurance, etc) on your tax return. This will mean that if your expenses are more than the rent recieved, you will recieve a tax refund when you lodge your tax return.
This is a good option if you have high mortgage repayments and a high LVR, and also if you can find a place to rent that is cheaper than the rent you will recieve from your house. You will also be eligable for Capital Gains Tax Exemption provided you do not move out of your home for more than 6 years and you do not claim a second property as your PPOR.
Have you switched your loan to Interest Only?? This will make you repayments much less than if you are also paying off the principle, and may mean that you can stay in your home if you do not really want to move.
LukeDerekMember@derekJoin Date: 2004Post Count: 3,544
Just adding to Luke's suggestion – at this stage and while you work out what you want to do with this property long term I would suggest placing the equivalent of your principle repayment into an offset account linked to the loan.
For example if your interest bill is $800/month and you are currently paying $1000/month then place the difference $200/month into an offset account. Treat it as a tax and you won't notice the difference.
This means that should you move back into the property at a later date you can make a lump sum repayment on the mortgage.
If on the other hand you decide you want to live elsewhere than you will be able to use the cash saved as a deposit.
Very good suggestion by Derek and a strategy that most users of this forum adopt. It provides maximum flexibility for future purchases.
Luke.savanahmp2401Member@savanahmp2401Join Date: 2011Post Count: 8
thanks guys.. this helps a lot.
just a bit confused with CGTE, my understanding is to be exempted, you rent out the property for 6 years then move back in is that right?
Yes, I belive that you can claim the CGTE for up to 6 years from the time you begin renting it out. So you can rent it for 5 years, move back in for a few months, then rent again for another 5 years, move back in for a few months etc etc etc.
LukeXeniaMember@xeniaJoin Date: 2002Post Count: 1,231
Make sure you have landlord's insurancetraolcoladisMember@traolcoladisJoin Date: 2010Post Count: 19
Yes and definitely read the fine print that will cover your property before you have the need to. This is because the devil is in the detail. It is what you are not covered for that will more than likely bite you in the rear.
Important point is that if your tenant does not look after the property then you have to be prepared for major repairs. It is not all hell-fire and brim-stone either. There are good tenants out there. Just make sure that you or your agent filter the applicants properly If something seems to be off with the application then go with your gut.DHCPMember@dhcpJoin Date: 2010Post Count: 190
Alternatively, if you rent out your PPOR and it became negatively geared IP, get a quantity surveyor to produce a schedule for depreciation which you can claim from ATO. The beauty about this is you don't have to wait until the end of the year to get your refund of negative loss (i.e., your outlays are greater than your total rental income), you can apply for PAYG variation form (section 15/15)…please consult with your accountant about this. This will help you with your cashflow management on servicing your IP loan.