Changing from P&I to IO. Pre-paying interest to reduce tax questions.

Hi All

Looking for a bit of advice here.. I think i'm on the right track but would like some reassurance after speaking with my accountant today.

Situation is.

Have a 2br unit in inner North Melbourne, bank valued at $400K, $191K principal owing. For 9 years been paying P&I. Unit solely in wife's name. Rented for $1550 pcm.

Wife has just gone on maternity leave. Had 13/14 income of 140K.

Proposal is to revert the property to IO, instead of P&I (has been P&I for 9 years). Remove the offset.
Bank has offered fix rate <5%.

Big question is, the proposal to pre-pay interest in 13/14 for the following 12 months (14/15) to reduce the wife's income as 14/15 will be a soft year for her not working.
Do I need to be cautious of anything, or does this seem pretty sound.

Thanks for all your help.
 
I doubt your lender will be able to process the form and draw down the loan prior to the EOFY, I guess if they dont your no worse off than you were originally. let us know how you go.
 
Good news.. It was approved mid morning. All done. The benefits of using a smaller bank... they bend over backwards to make it work!
 
Hi All

Looking for a bit of advice here.. I think i'm on the right track but would like some reassurance after speaking with my accountant today.

Situation is.

Have a 2br unit in inner North Melbourne, bank valued at $400K, $191K principal owing. For 9 years been paying P&I. Unit solely in wife's name. Rented for $1550 pcm.

Wife has just gone on maternity leave. Had 13/14 income of 140K.

Proposal is to revert the property to IO, instead of P&I (has been P&I for 9 years). Remove the offset.
Bank has offered fix rate <5%.

Big question is, the proposal to pre-pay interest in 13/14 for the following 12 months (14/15) to reduce the wife's income as 14/15 will be a soft year for her not working.
Do I need to be cautious of anything, or does this seem pretty sound.

Thanks for all your help.
Wow, what a great idea. I wish I had an accountant like that. And I wish I done that before going on maternity leave :-(
Mine just makes mistakes and charges me for them. Last time he even told me that I am out of my mind asking for money back or discount because his fees are tax deductible.
 
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