Cashing out equity on PPOR turned into IP

Discussion in 'Loans & Mortgage Brokers' started by douglashv, 12th Jun, 2021.

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  1. douglashv

    douglashv New Member

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    Hey all,

    We started rentvesting in February this year. We rented out our house (PPOR) while having a fixed rate mortgage that is due to end in September (the fix rate is 3.08% with CBA). We now live renting in another location.

    How do we go about refinancing and cashing out some equity for personal expenses when the fix rate ends in September?

    Is there a chance we can maintain an owner's occupied interest rate? Which is usually lower than the rates for Investment.

    Thoughts?
     
    douglashv, 12th Jun, 2021
    #1
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    sounds like a simples refi/top up.

    Depending on a bunch of things you may find that the current IP rates may be similar to your old PPOR rate

    Are you likley ever to move back into that place ?

    ta
    rolf
     
    Rolf Latham, 12th Jun, 2021
    #2
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Split the loan to avoid tax issues
     
    Terry_w, 12th Jun, 2021
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  4. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    First steps is to do a couple of valuations to see what sort of usable equity you can draw out and also see what your servicability is.

    Then ensure its structure correctly to segregate taxable and non taxable debt.
     
    Tony Xia, 12th Jun, 2021
    #4
  5. douglashv

    douglashv New Member

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    We won't be moving into the property any time soon We might sell at some point after 5 years. At this point, we just want to decrease as much as possible our repayments and cash out some equity. We are just wondering if it's possible to obtain a ppor interest rate < 2% (or as an investment rate if that's not possible?
     
    douglashv, 12th Jun, 2021
    #5
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Subject to a million things

    2.24 IO fixed for investment is doable

    ta
    rolf
     
    Rolf Latham, 12th Jun, 2021
    #6
  7. skater

    skater Well-Known Member

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    Do you realise that any additional borrowings on this property are not tax deductible, unless they are for investment purposes. Make sure that you split your loan so that you don't mix the borrowing.
     
    skater, 12th Jun, 2021
    #7
  8. douglashv

    douglashv New Member

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    Thanks for the replies. My understanding on mortgages is not my strong suit. May I ask why and how should I split the loan in this case? What would be the purpose?
     
    douglashv, 12th Jun, 2021
    #8
  9. The Y-man

    The Y-man Moderator Staff Member

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    As per @skater above - possibly BIG tax implications.

    The Y-man
     
    The Y-man, 12th Jun, 2021
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  10. skater

    skater Well-Known Member

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    Book an appointment with your accountant.
     
    skater, 12th Jun, 2021
    #10
  11. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Im not a tax guy.

    Assume u have a loan of 400, which is assumed to be all for the initial purchase of the property AND/or improvements to said property, the interest on the 400 is deductible.

    if you say increase the loan to 500 k, and spend the 100 on say cars or boats, the 100 is NOT deductible and now you have a mixed purpose loan.

    Not a major hassle while the loan is IO, since you can apportion the interest, but if the loan is PI, you need to repay both proportions equally which eats into your deductability and may mess it up so much that all deductions may be denied under an audit.

    Suggest you seek specific credit and taxation advice

    ta
    rolf
     
    Rolf Latham, 12th Jun, 2021
    #11
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