Convert PPOR into IP

Hi

We have outgrown our 15.5sq PPOR and looking at a larger house as the current one we are in served us well when it was DINK. We are wanting to buy a larger house for our PPOR and possibly keep our existing one and rent it out as an IP. We have not discharged our mortgage (line of credit), it is paid off (currently in credit) but bank has said in the past we can keep it ($12 a month fees)

If we do rent out our existing house, can we negative gear it? Been told by the bank we can draw on our existing line of credit/funds (abt 200k) and get a second mortgage over the "new house" and put that existing line of credit/funds (abt 200k) from first mortgage and what ever savings we have into it.

Qsts
Can we -ve gear our existing PPOR as an IP if we use the above scenario?
Is this all possible?
In this scenario would I need 2 mortgages? Guess u can transfer one to the other (as the mortgage is over the existing house)

Not after expert advise or hold anyone to what they say. Have to speak to the bank and an accountant when time permits, just thought I would get the ball rolling.....
 
Navy blue, you can search PPOR to IP in Somersoft for other threads as well, as this topic has been done to death.

No, you will not be able to negatively gear your old PPOR as IP.

The ATO will look at you taking out 200K as use of the money for personal use (ie, your new PPOR), rather than for investment purposes, so the interest payed on this 200K will not be tax deductible. It does not matter to the ATO that the money was taken out of a loan that will be on your IP. It matters what the money is used for. In this case your new PPOR.

Perhaps in your situation
1)your could sell your current PPOR, and upgrading. Then using any equity in your PPOR for investment. In this situation, as the money is for investment, that portion of your loan will then be tax deductible.
2)Take the 200K out of current and effectively have 100% non-tax deductible loan. But still help pay the PPOR mortgage with the rent that comes in from the IP.

Consider also looking at offset accounts for any future loans. In this way, the money sits in the offset account (not payed directly into the loan). Then when you need the money (for personal use, etc), you can take the money out of the offset account, without affecting the deductibility on the full loan amount.
 
Ta Bluestorm

Think you answered my qstns, thought we couldnt convert our current PPOR into IP as basically because we have lived in it. Been told "it is possible", we can create a trust, seel it to the trust etc, seems messy to me.

Probably best thing to do is
Sell current PPOR, buy new PPOR and buy new IP. But double stamp duties etc, conveyancing etc......
 
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