Getting a new loan from Owner Occupied Property to pay for 1st IP deposit

Hi all,

I am avoiding to cross-collateralize the two properties and instead I am getting a new loan from my PPOR to pay for IP deposit. My mortgage broker that the interest for the new loan in PPOR is tax deductible and my accountant agrees but I sense there is a lack of confidence on his part because he does not usually do property investment.

What do you think?

Also do you know any good accountant I can consult to preferably Parramatta CBD area.

Thanks

 

Thanks rolf.

Yes it would be a separate loan but still tied up to the PPOR security.

Both the PPOR and IP will be on the same lender and I believe the loan will be release as cash to pay for the IP deposit.

 

If the loan is for the purchase of an investment property than it should be tax deductible. You are basically creating an equity loan by the sounds of it. Yes avoid cross-collateralization it causes headaches later on when you need to extract equity from only one property. can't help with the accountant as i live in Brisbane, sorry.

 

Thanks, is there a documentation or process that me and the lender should work out to prove that the new loan is going to be for investment purposes? Just want to make sure I don't miss a step.

 

Why is a mortgage broker giving tax advice? Disregard what they say and rely on the accountant - assuming he is a tax agent.

 

Umm tricky question. For a start the banks will make you pay a higher interest rate on investor loans. The loan should be classified as investment with the bank.

 

This is a good point. It just came up when me and my broker was discussing structuring of the loan and I asked for tax implications. I did my due diligence to consult an accountant but I am currently looking for someone who is expert in properties.

 

You should read my tax tips.

 

The best loan structure would be to ensure the equity release is a separate loan to your present PPOR loan. (A new split). Dont blend loans.

Ask your accountant when the loan interest for the IP deposit is deductible. The answer may assist to demonstrate if they know property tax. Correct answer is from the time the deposit is paid out of the loan proceeds. If they say the property hasnt produce rental income or isnt available for rent its wrong.

Have a look at our PAS TV video series which explains loads about property and tax issues. Also read up on Terrys Tax Tips

 

reading it now. thanks

 

I previously read Terry's tax tips, and we had our first consultation (over the phone) yesterday. We based this both on his contributions to the forums, plus countless other recommendations from others. We were very happy with Terry's service, and would also highly recommend him if you need specific advice.

 

Had a mortgage broker question the client why they would be using a unit trust to acquire resi property when it would be better in joint names.

Client wanted the option of moving it into an smsf later on.

 

Yes - A UT or a fixed unit trust safeguards resi property for a smsf later provided the property is ungeared or not used as loan security. In some cases it can even be geared and the SMSF can still invest too.

Also another benefit is the respective unitholders can be adjusted and in some states there isnt duty. Small proportionate CGT sure. So my UT buys a $1.2m property and I am unitholder then trust issues all new units to Mike and then I redeem all my units. Handover trustee control to Mike. Duty in NSW Zero. CGT in NSW can be zero too. (Its not as simple as this as financing issues require attention)

Warning : QLD property buyers should carefully consider advice before thinking this strategy works. The QLD duties act has an indirect duties rule which bites.

I dont understand why so many people rush to use a DT in QLD. I have always felt a UT is better and a DT owns all the units in the UTs. If the land tax act ever changes its also easier to address fixing ownership !!