Loan Structure & Reducing Interest on PPOR

Discussion in 'Investment Strategy' started by CuriousCat, 17th May, 2017.

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  1. CuriousCat

    CuriousCat Member

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    My husband and I currently have a home that is our PPOR and recently had it refinanced to free up the equity for future IP. Currently our loan is structured as $300k in P&I & $100k in Int only all being variable. While we zero in on the IP we want, we are paying a high amt of interest on the $100k. My question is if i put all of that $100k in our offset account so that offsets the int on our P&I loan and transfer that back when we are ready to invest so the interest on that would be fairly deductible, would that be a concern? Is this a good way of making your money work for you?
     
  2. Terry_w

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

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    No.

    Get some tax advice, sounds like you are creating issues here.
     
  3. CuriousCat

    CuriousCat Member

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    How do you mean? From ur comment it seems that withdrawing the 100k n placing in my offset would constitute personal usage and then subsequently transferring back to the loan account would imply a paying off of the loan ? Am i right here at all?
     
  4. Terry_w

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

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    I am confused what you are doing, but if you borrow $100k and park it in an offset account on the main residence loan the interest won't be deductible on the $100k.
     
  5. CuriousCat

    CuriousCat Member

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    my intention is to use that 100k to lower the interest i pay on the loan overall till we make a decision on the IP we want
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    create a separate offset on the 100 k or stick it in the redraw of the 100 k

    either way would have been the right way from the start

    Lumping the borrowed cash in with savings ........ not a good look for tax dedns in the future on the 100 k borrowed

    see Domjan V Ato

    ta

    rol
     
  7. Terry_w

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

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    That doesn't make the interest tax deductible.

    I would do what Rolf suggests, make a new offset account linked to the $100k loan and park it there. Then pay back into the loan and redraw at the time you want to invest.
     
  8. CuriousCat

    CuriousCat Member

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    Following the above, offset of 100k will now offset the $100k loan from the bank which will lead to no interest and upon deciding where to invest i can pay back for eg $50k into the loan and subsequently withdraw to pay down as deposit for whatever IP?
     
  9. Terry_w

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

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    Tax Tip 1: Parking borrowed money in an offset account https://propertychat.com.au/communi...ing-borrowed-money-in-an-offset-account.1313/
     

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