Best way to draw funds for a renovation of a PPOR I want to make an IP?

[albanga]

Hey All,
What is the best way to go about drawing funds from the equity in my PPOR so that I can renovate it and then move out and turn it into an IP?

I want to ensure that the interest on the drawn funds are tax deductible when it becomes an IP?

Thanks in advance.

 

[Rolf Latham]

if the base loan(s) arent contaminated already ( ie a loc or redraw all in one loan that has had salary go in and out)


topping up and adding to the PPOR loan will mean its all used for that debt

or

adding a separate loan to the base loan achieves the same result

ta
rolf

 

[Terry_w]

I agree with Rolf

Increase exisiting loan if it is not contaminated and only relates to the purchase of that property. Or a new loan.

 

[Paul@PFI]

Most important issue is that when the additional $ is drawn that it directly pays those reno costs.

 

[albanga]

Hey guys,
Thanks for the quick replies.
The base loan is P+I but has no redraw facility, just an offset account that my wage goes into.
I have little savings in the offset but the current loan is 430k (Value is 610k).
Are you suggesting I get my current lender to get me a separate loan for say 50k so I would have 2 loans, 1 for 430k and another for 50k.
OR will my 430k loan just go to 480k and those funds will be available as a redraw or LOC?

 

[Rolf Latham]

Hey guys,
Thanks for the quick replies.
The base loan is P+I but has no redraw facility, just an offset account that my wage goes into.
I have little savings in the offset but the current loan is 430k (Value is 610k).
Are you suggesting I get my current lender to get me a separate loan for say 50k so I would have 2 loans, 1 for 430k and another for 50k.
OR will my 430k loan just go to 480k and those funds will be available as a redraw or LOC?

id get a separate loan with transactional redraw or LOC done

ta
rolf

 

[Blixsem]

Is it worth doing this if you intend to one day (10 years from now) convert the PPOR to a IP. The plan being that the loan will still be there once you covert it and then claim the interest as deductable. 10 years from now the interest claims will be small but it is something at least.

Or do you just fund the reno's out of your own pocket for now.

 

[albanga]

id get a separate loan with transactional redraw or LOC done

ta
rolf

Thanks Rolf!
Just on this and I have spoken about this briefly before but I am also developing another dwelling to the rear of my land and have so far spent about 8k of savings on plans and permits (I know this was not wise) but I will need around another 20k for costs such as subdivision, connection of utilities.etc.

Am i best to do the same thing with this so in theory I now have an additional 2 loans? 1 for the renovations and 1 for the development. Or because I am going to have both properties as investments do I just have the 1 additional loan and use the funds for both the reno and development?

 

[Terry_w]

Is it worth doing this if you intend to one day (10 years from now) convert the PPOR to a IP. The plan being that the loan will still be there once you covert it and then claim the interest as deductable. 10 years from now the interest claims will be small but it is something at least.

Or do you just fund the reno's out of your own pocket for now.

That is why you would do it. Once the property is an IP the interest on the loan should be deductible (if set up right) and you will have more cash left for the new PPOR - of which any loan won't be deductible.