Refinance IP loan + LOC

Hi I'm considering a refinance and would like to know if I could lose deductibility on the interest.

My current situation:
Home loan + LOC secured by an investment property. The LOC is for income producing purposes.

If I consolidate both of these loans into a single loan would I lose deductibility on the interest?

 

You would create a mixed purpose loan and if you subsequently deposit into the loan or if it is PI you will be losing deductions.

 

Thanks for your reply. To be clear, both loans are for income producing purposes. The home loan portion is for a the investment property.
My understanding is that it would be a mixed purpose loan if one of the original loans was being used for non-income producing purposes?

 

Was the LOC used for the property? If not then both uses will be the same so no mixing

 

The LOC was used to buy ETFs / managed funds (doesn't seem like a great idea in hindsight).

And the other loan was for the investment property.

 

In that case the loan would be mixed as there are 2 uses. If the owner of the shares and the property is the same this may not be a big deal however.

 

Hi Terry I just read your old post:
Legal Tip 15: An issue with mixed purpose loans where both portions are investment

The takeaways I got from that were:

1. Once I sell one of the investment assets I could lose some deductibility on the mixed purpose loan
2. I can keep the loans deductible by simply refinancing into two separate loans
3. Taxes are complicated

 

Here is another one that is relevant:

Tax Tip 55: An Exception to the rule about splitting before Repaying a Mixed Loan Tax Tip 55: An Exception to the rule about splitting before Repaying a Mixed Loan