Refinancing IP loan to pay of PPOR loan

Viewing 10 posts - 1 through 10 (of 10 total)

PFrankyX
Member
@pfrankyx
Join Date: 2012
Post Count: 33
June 3, 2012 - 2:32 am
From an accounting perspective, if I have an investment property with a LVR of 50% and want to refinance to an LVR of 80% and use those funds to pay off my PPOR, will I be able to claim the new full amount of interest as a deduction or is it only the amount pre refinance that i am able to claim as an expense as the funds are drawn for personal use to pay down a non-deductible debt?
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
June 3, 2012 - 2:34 am
No you can't.
The additional borrowings are for a PPOR so they're not deductible.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone Me
Mortgage Broker assisting clients Australia wide Email: [email protected]
igreen
Participant
@igreen
Join Date: 2011
Post Count: 14
June 4, 2012 - 1:12 am
Another option
if you have more than one property both with 50%, then
Borrow upto 80% from property B and put it into Property A. Then sell property A and put all the money in your PPOR.
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
June 4, 2012 - 2:19 am
igreen wrote:
Another option if you have more than one property both with 50%, then Borrow upto 80% from property B and put it into Property A. Then sell property A and put all the money in your PPOR.
That won't help because there would be a loan from property B which would need to be paid back when A is sold.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
PFrankyX
Member
@pfrankyx
Join Date: 2012
Post Count: 33
June 4, 2012 - 2:36 am
Terryw wrote:
That won't help because there would be a loan from property B which would need to be paid back when A is sold.
That’s ok, it does make sense that to be able to claim the interest as a deduction any funds drawn / refinance etc need to be spent on investment and not personal purposes.
Therefore if I wish to pay off my PPOR, I simply forfeit the ability to claim the additional interest as a deduction.
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
June 4, 2012 - 3:23 am
Yes thats true but i am not sure why you would do it?
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
PFrankyX
Member
@pfrankyx
Join Date: 2012
Post Count: 33
June 4, 2012 - 3:25 am
The greater plan is to pay off my PPOR as fast as i can and i am working out if it is going to be better off in the long run to either refinance an IP and forfeit the deductions or sell and pay CGT.
Time will tell when the figures are in place.
But my question has been answered that i cannot claim the interest if i refinance an IP to pay off my PPOR.
Thanks all.
Derek
Member
@derek
Join Date: 2004
Post Count: 3,544
June 4, 2012 - 8:46 am
All you are doing is 'shifting the debt' – no advantage other than an unencumbered home.
On paper you may have paid the home off but the debt remains.
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
June 4, 2012 - 10:00 pm
Yes Derek my sentiments exactly but i assumed all PF wanted was an unecumbered home.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Derek
Member
@derek
Join Date: 2004
Post Count: 3,544
June 5, 2012 - 12:08 am
Qlds007 wrote:
an unecumbered home.
Yep that is the only advantage I see. Non-deductible debt will remain albeit 'hidden' in a second loan against refinanced IP.
As an afterthought – if you are going down this pathway lake sure you split your new loans so the 'PPOR' component is clearly distinguished from the IP component. Make things much cleaner for tax purposes.