How to un-mix two monies (each belonging to diff invest. prop.)

Hi,

Last week when my investment land(land 2) settled, the bank deducted settlement fee ($350) from an offset account which was offsetting to a different investment land (land 1) loan. As a result, offset account has transaction which belong to land 2 as well as land 1.

Scenario in detail:

Initially
Land 1 loan = $343k
land 1 offset bal= $78,350 (hence daily interest is calculated on 343,000 - 78,350= 264,650)


After land 2 settles last week:
Land 2 loan = $345k

Land 1 offset = $78,350 - $350 = $78k (hence daily interest is calculated on 343,000 - 78,350= 265,000)

As you can see money is withdrawn from land 1 offset and used for a expenses other than that of land 1.


Question: Is this a problem? If yes, how to solve? Can I just transfer $350 from personal saving account into land 1 offset account? But hen how to calculate and sort out 1 week interest?

Thanks for help.

-Ravi

 

Technically it created a mixed loan. Banks often ruin plans like this. See if they can reverse the transaction.

Tax Tip 44: How to Un-Mix a Mixed Loan

 

As long as both are deductible, I wouldn't worry about it too much

 

I wouldn't have thought money coming out of any offset account would mix the loan?

 

You're right BB.

I took the op to mean he had borrowed money in the offset, if this is not the case then no issue.
Tax Tip 82: Taking money from an offset account on an IP and Claiming Interest

If there was borrowed money, then it would be just be a matter of apportioning the interest - about 99% would be deductible.

 

Thanks guys for quick response.
@Terry_w The money in Land 1 offset($78,350) is 100% borrowed money (it's equity from land 1).

Reverse to what? Should I ask them to withdraw exact amount ($350) from my personal saving account and put in land 1 offset? I can do it myself using online banking. How about 1 week interest ? Can that be adjusted during tax time? or I have to take care of it now? ($350 for 1 week @4.5% = 30c).

If it is not a huge issue I can leave it as it is now and apportion interest calculation during tax time.
Also, land 1 is joint name while land 2 is single title. Would that make any difference?

 

My bank made a mistake when I refinanced IP1.. Thankfully they worked their magic and sorted everything out correctly!

 

You can ask the lender to reverse the transaction so that it never happened. This is the ideal solution - it is like someone putting money into the wrong account. They don't simply take it out, but reverse it.

 

Just think of this as a LOC and you have borrowed $350 for a private expense. You cannot simply pay back $350 as it will come off all portions of the loan. But you could apportion the loan by working out the %. 350/78350 = 0.44% of it won't be deductible. So just claim 99.56% of the interest.

 

Thanks @Terry_w