Hi all, Very new to it all but I was wondering a few things. I currently have a P&I loan on an IP, where the loan is worth 390k and property is valued at 550k, and I have 50k of equity able to be taken out. If I refinance this loan to 440k and use that 50k equity to purchase another property will this cause issues with my original P&I loan when it comes to tax deductions on the interest? What is the best way to go about this if I want to ensure my tax is deductible from the first IP loan. I'm very unfamiliar to tax and especially it's implications regarding this topic, but I'm keen to learn more, so any help is appreciated! Regards, Gregg
I have written hundreds of tips on this sort of thing here. Just split the loan. Borrow $50k or whatever amount as a separate loan.
Best not to get the loans mixed. You might sell one later on or move into one of the properties. Consider offset accounts as well.
Thanks Terry, I've read a lot of your material already. I'm still getting my head around split loans, am I right that it'd look like the following: Loan A (Existing Loan) = 390k *Split Loan by Obtaining Loan B* Loan B = 50k Then I use Loan B for and property purchase?
Thanks again Terry. This may take longer to explain but, if I used Loan B (50k) towards a owner occupied home loan so I can claim my FHOG. Will Loan B be tax deductible in 6 months after I move out and rent out the place? or does it get complicated in that scenario?
Deductibility depends on use. If you borrow to acquire a property and later rent out that property the interest will be deductible as it was used for an income producing purpose - deductible from the date the property is rented or available for rent, depending on the circumstances.
I see a side issue which will most probably derail your plans. You already own an investment property and so are very unlikely to be eligible for a FHOG.
I thought that as well but I've spoken to my mortgage broker and based of the criteria, I'm still eligible for the FHOG.
Investors can own multiple properties but still be eligible for first-home buyer benefits This was a few years ago, not sure if anythings changed. I'll definitely check from a licensed professional though before proceeding with the next house purchase.