Refinance - interest deductibility

Discussion in 'Loans & Mortgage Brokers' started by Learner2, 27th Nov, 2019.

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  1. Learner2

    Learner2 Member

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    I have an Interest only loan for IP with CBA and I recently refinanced to pull out equity. I split the new loan (as I want to use it as deposit for another property and deduct interest). During the settlement of new loan, bank used few hundred dollars from the split to pay off interest pending on old loan and transferred the remaining to my checking account. Ideally, I wanted to use the entire amount of the new split for purchasing new property so that full interest on it is tax deductible. Clean and easy. Now, what do I do?

    Below are the numbers
    Old loan - 300k
    New loan - 300k + 45k

    Bank used around 800$ out of 45k to pay off the interest on old loan. So now, do I need to apportion interest for the $44,200 every year and claim deduction only on that?
     
  2. Terry_w

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

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    Yes if old loan is non-deductible.

    But what is 44,200/45,000 when you round it up?
     
  3. Learner2

    Learner2 Member

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    Sorry, I didn't understand your response. Old loan is also deductible. What I mean is - they used few hundred dollars from new split loan to make interest payment on old loan.
     
  4. Terry_w

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

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    So you have essentially borrowed to pay interest. Generally deductible unless a scheme to increase deductions.
     
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