Refinancing PPOR ahead of turning it into a rental

Discussion in 'Loans & Mortgage Brokers' started by AccidentalInvestor, 4th Feb, 2019.

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  1. AccidentalInvestor

    AccidentalInvestor New Member

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    Hi there. We plan to move out of our PPOR in about a year, after which we will rent it out. We want to refinance this year to release some equity for various things, including a refresh of the appliances, fixtures and fittings in the house. Question- if we refinance now while still living here, then later rent it out, can we claim the interest on the whole loan, or only part of it?
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    You can only claim interest on the loan from when it becomes a rental property, not before then.

    Once the property is a rental, the interest on whatever money was borrowed for the purchase of the property, or it's refurbishment, will likely be deductible.
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Question Please

    what sort of loan do you have right now ?

    Where does your salary go?

    ta

    rolf
     
  4. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    Part of it. Only the interest on the portion of the loan that relates to the property purchase.
    It is likely you will also have a mixed purpose loan too,.
     
  5. craigc

    craigc Well-Known Member

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    Also consider the timing of the refresh of appliances etc, as this will likely impact your future depreciation deductions.
     
  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    The impact of s118-192 which resets the property costbase and the choice of using the main residence exemption absence rule should also be understood.

    The replacement of appliances will not be depreciable if it is done while you still live there. Only if new appliances are installed after you move out. eg If the property has an existing AC it cant be depreciated when rental commences as it is used.

    It may assist to get a QS report prepared. The QS can guide including the replacements etc
     
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