Borrowing power

Hi all

My partner and I bought in joint names last year, current PPOR is an IO loan using the extra funds to renovate. In 2 years renos will be done and we will look to buy our first IP before having kids. On rough estimate we will have 54 k of usuable equity as a deposit. I am the higher income earner by a fair margin over my wife, I earn 90 k she earns 40 k. What should I do as a general Rule, leave current PPOR ownership as is an buy the IP together or spousal transfer the PPOR debt to my wife and leave myself debt free?

 

I'd be surprised if a bank is going to let you transfer the IO loan, and extract equity, to your wife with her wage. Some of the MB might have a better view of this.

 

How are you estimating this? Market value less current loan x 80%? Some actual numbers would help here.

Even if you could do a spousal transfer, are you so sure that you wont move out of the PPOR in a few years and rent it out?

 

Don't know what Tas laws are like but I'm not sure you could transfer to partner without some form of stamp duty. Going from 100% to 50% is generally without cost but INAL.

 

Yes actual numbers, purchase price was 240, current value 265. We are renovating a bathroom, laundry, adding aluminium double glazed windows, a deck, car port, new fencing. Being conservative and saying 330 k value if the market does nothing. 330-20 % is 264. Loan amount 210 k interest only. Leaving 54 k equity. Renting it out is a possibility but how is that relevent? I realise there may be stamp duty to pay but if I can then borrow more money then its worth it

 

sorry my post above about spousal transfer is wrong. I did not consider simply gifting it to them. best speak to property lawyer and mortgage broker about structuring.

 

Any mortgage brokers have any insight on this?

 

The answer depends on what you're looking to achieve and the numbers. You may want to get tax advice on the structuring.

 

The goal would be to borrow as much as possible so I can buy a better asset. Not necessarily after the best tax outcome to start with

 

The tax issues here dont appear to work.

The new borrowed $$$ would be used to either
1. Repay the original loan so its a zero sum game with a likelyhood no change of ownership has occurred so its just a refinance requiring the original loan to be repaid by $54K or
2. Be used to buy the new property in which case its non-deductible when its your home. The USE of borrowed money determines its deductibility. The legal owners will generally share in interest too unless each owner separately borrows at the time of settlement.

A equity release should be separate loan split so the new purpose can be kept apart from the original loan used to acquire.

 

Sorry should have been more clear, yes the 54 k would be a separate loan split used for investment purposes. Just wanting to know which structure would be the best for borrowing power and if its worth the cost of stamp duty. I guess 54 k is 54 k regardless of who's name? unsure