Getting conflicting advice about refinancing and negative gearing

Hi,

Would love some help as i am getting conflicting advice from lenders, friends and accountants. Below is my situation.

Currently live in a home worth $500K and we owe 40K on it.
Negative gearing an investment property worth $750K and owe $490K ($350 week rent)
Combined income with wife $110K a year with two kids.
$40K invested in shares
No other debts

We are looking at buying an apartment off the plan ($620K) to move into when its completed. We thought we would be able to re finance our current house for the total amount, move out and rent it while negative gearing it. Than putting the $500K towards the apartment thus still only having a small mortgage as the difference.

Our current bank said they cant do that and want us to sell a property before they can give us the loan. They also said we are unable to negative gear the house we plan on refinancing and moving out. One accountant said we can while another said we cant.

So we are a little confued as we have zero finance knowledge. Any advice would be greatly appreciated.

Thanks for reading
Joe

 

Why are you asking a tax question to your bank, and more importantly why are they giving tax advice - and breaching a few laws.

Read my tax tips.

Deductibility of interest is determined by use to which the borrowed funds are put. So if you borrow against an investment property and use those funds for a main residence then the interest is NOT deductible.

 

You can't negative gear your existing house. If you draw equity from this house to purchase a new home, the purpose of those funds will be 'to purchase your new home' which is generally not a tax deductible purpose. As a result there's no gearing benefits in all this. There may be some strategies to get around this, but it's a common problem that people have when they pay off their home then want to upgrade.

You might be able to have one of your sell their half of the home to the other person, taking out a loan as you do it. This may give you some tax deductions. Many accountant's might not come up with this strategy without some prompting, but I have seen it work. It may not quite get the full outcome you want, but it may be a good compromise.


There's not enough information to determine if you can keep your existing house as an investment. One bank saying 'no' doesn't mean others can't do it. Perhaps contact myself or one of the other brokers to get a better understanding of what a range of lenders can do. We're also more likely to better educate you in various finance and investment strategies than you'd ever get from a bank.

 

See also
Strategy: 11 Strategies for when you move out of the PPOR and keep it https://propertychat.com.au/communi...n-you-move-out-of-the-ppor-and-keep-it.11311/

 

Nope, you cannot.

If your accountant says you can, sack them !

 

Some accountant will deduct the interest on a loan when they know it shouldn't be allowed or its questionable. To their defense remember that they don't always know the history of the loan so if the client thinks it is tax deductible they could make an honest mistake. Some play dumb.

 

Some are not playing either!

 

lol.....and here we are often agonising over a re finance etc being a few hundred dollars out.....