Changing my IP to PPOR and then back to IP.

[DealSeeker]

Hi,
I have this scenario.

I have a PPOR fully paid and an IP on investment loan.

My situation is that when I purchased my IP , I took a smaller loan and the rest was with my own cash. If I were to apply the loan today, the bank will give me another 250K loan.

Now, I would like to have the 250K loan to assist me in renovating/upgrading/rebuilding my PPOR.

However as we all know, I'm not allowed to refinance my existing IP investment loan and then use the money for private purposes.

Could I make my IP into my PPOR for 6 mths. Since its a PPOR, I can then refinance the loan for the extra 250K. After 6 mths, I change it back to IP with the increased loan amount.


As for my existing PPOR, I will rent it out.

I'm aware I need to do valuations for both Properties so that my future CGT will be calculated accordingly.

So my question is will ATO frowned upon this idea of changing my IP to PPOR so that I refinance it with a larger loan and then changed it back to IP?



Thanks

 

[Terry_w]

Hi,
I have this scenario.

I have a PPOR fully paid and an IP on investment loan.

My situation is that when I purchased my IP , I took a smaller loan and the rest was with my own cash. If I were to apply the loan today, the bank will give me another 250K loan.

Now, I would like to have the 250K loan to assist me in renovating/upgrading/rebuilding my PPOR.

However as we all know, I'm not allowed to refinance my existing IP investment loan and then use the money for private purposes.

Could I make my IP into my PPOR for 6 mths. Since its a PPOR, I can then refinance the loan for the extra 250K. After 6 mths, I change it back to IP with the increased loan amount.


As for my existing PPOR, I will rent it out.

I'm aware I need to do valuations for both Properties so that my future CGT will be calculated accordingly.

So my question is will ATO frowned upon this idea of changing my IP to PPOR so that I refinance it with a larger loan and then changed it back to IP?



Thanks

The deductibility of interest on the new $250k loan will depend on what it is used for, not the security. Moving in won't change this.

 

[DealSeeker]

Really?

How about a person owning a PPOR for ten years over that time he redraw on his loan to buy a car etc etc.
At the end is still his home loan and then he converted it into IP.

Won't he be able to use the whole home loan now as an investment loan?

 

[Terry_w]

R
Won't he be able to use the whole home loan now as an investment loan?

No, because part of the loan will related to borrowings for the car.

The part associated with the purchase of the house originally may be deductible - if this can be worked out.

This is why it is a good idea never to redraw from a PPOR loan.