IP --> PPoR loan restructure

Hello,

I have four IPs. Each is IP secures one loan.

I'm considering moving into one of the IPs to live.

Is it possible/advantageous for me to restructure my loans to minimise the amount I'll have to pay to own the house I'm going to live in?

I'm sure you will all need more information from me to help advise me, so please just ask.

Really appreciate any help, I'm nervous as hell!

 

Do any of the loans have Offset accounts?

Do you have any spare cash?

 

There's a form to fill to change to OO rate, and if you want to start paying P&I you can do that too.
Otherwise, get your offset/s attached to it, and you're away!

 

Yes to both.

I realise I can move the offset to the loan against the PPoR.

I have some spare cash.

 

Hi Jess,

I have equity in all four properties. Over the years, all the loans have been refinanced - at one stage, they were all crossed. My point is, the loan that is secured by my (soon to be) PPoR wasn't the original loan taken out for that property. I think all the loans are "contaminated", but in a way they aren't, because all the loans are (were) for IPs.

Using the equity I've built up in all my properties, is it possible to restructure my loans so all the loans are secured by the three IP's, leaving the PPoR debt free? That's what I'm aiming for, which seems too good to be true, so I presume I'm missing something(s).

 

You may be able too if there's enough equity.

 

Well there won't be enough equity to make it debt free, but you get the idea.

Is it possible to refinance this way (using the equity)? I said before, "restructure" rather than refinance, because if I refinance, the purpose won't be for buying an IP, so won't be deductible. At least, that's what's bouncing around in my head!!! Please help!!

 

It won't be deductible anyways - you'll effectively be refinancing a non-deductible debt. The only real benefit is less debt secured to your home.

 

I guess that's what I'm trying to work out. If there is a way to "restructure" rather than refinance so I can maintain deductibility with all my IPs, but ensure the loan on my PPoR is as small as possible.

Is there some way I can use the equity I've built up in the IPs to "shift" the debt from the IP (that is to become the PPoR) to the other IPs?

I dont' want to mess up the deductibility of the other IPs.

 

No - the debt that is for your new PPOR won't be deductible no matter which way you cut it.

 

I realise that. As it stands, all four are currently IPs. Before I convert one to a PPoR, is there a way to refinance as much debt away from the IP I plan to convert, then make it my PPoR?

 

Deductibility depends on what the funds were used for and not what secures the loan.

So shuffling funds around won't change the deductibility.

 

Moving it around doesn't change the fact it's for your PPOR.

 

Hi Terry,

Originally, all the funds were used for IP purchases (so all deductible). Now, I'll be moving into one of the IPs, but the (original) purpose hasn't changed. But I'm sure all the loans won't be deductible once I move into one of the IPs.

How do I know which loan I need to pay out to own the PPoR? As I said earlier, of the course of multiple refinances, different loans have been secured by different IPs.

What do I do? I don't trust the bank to tell me the best thing for me.

 

This is tax advice so ignore what the bank is suggesting.

The purpose of the funds was probably to acquire a property. If this property is income producing the interest on those funds would be deductible.

The purpose doesn't change when you move in, but the interest on any loan associated with this property you are now living in won't be deductible.

It is your job to work out how much this is and to split the loan accordingly if you wish.

 

Thanks Terry.

The first point you make about the loan associated with the property no longer being deductible is the part I was trying to get to in my earlier posts.

Because the loan will no longer be deductible when I move in, wouldn't it be in my interests to restructure my loans prior to moving in so the least amount possible is left owing on the property I move into?

Also, as I said earlier, due to multiple refinancing, there is no way to tell how much money is actually owed on which property. I think. I could use the original purchase price I suppose. I don't know what to do, but I don't want to get into any strife.

 

Sounds like none of the interest is deductible if you cannot ascertain what amount was associated with each property. How have you been preparing the tax returns for all of these years?

I think what you are trying to ask is how to artificially inflate the amount of interest you can claim. Restructuring won't change deductibility so the amounts deductible won't change.

 

I have an accountant who does my tax returns. All the interest has been deductible up till now, as all of the properties were IPs.

I guess what I'm trying to ask now, is how can I tell how much will be deductible when I move into one of the IPs?

 

You will have to go back through your old statemetns and trace it all out. No other way.

 

Since all the loans are IO, won't it just be the purchase price?