Convert PPOR to IP or sell?

[serendip]

Noob question....

I want to achieve 2 things in the next 18 months. Buy my first IP & relocate us to a better suburb (driven by a few things but primarily better school zone before son starts school 2016).

I was thinking that I could convert PPOR to IP, pull a bunch of $ out of it & then buy. PPOR is in a good area for growth & very rentable. (NSW)

Having just spoken briefly to my finance guy he's saying that if I pull money out of PPOR only the current loan amount will be tax deductible and that if I go into LMI territory the insurance wont be tax deductible either. Is this right? I was thinking that it would be smarter to do that rather than incur selling / buying costs on another property. But if he's right I might be better off selling then buying a new IP & a new PPOR. Unfortunately don't yet have enough equity to avoid LMI on 2 properties....well not where I was thinking of buying anyway.

Talking again next week / getting valuations etc

 

[serendip]

Nevermind - went into the tax area & found the answer....hmmm... now I need to rethink!

 

[Terry_w]

Noob question....

I want to achieve 2 things in the next 18 months. Buy my first IP & relocate us to a better suburb (driven by a few things but primarily better school zone before son starts school 2016).

I was thinking that I could convert PPOR to IP, pull a bunch of $ out of it & then buy. PPOR is in a good area for growth & very rentable. (NSW)

Having just spoken briefly to my finance guy he's saying that if I pull money out of PPOR only the current loan amount will be tax deductible and that if I go into LMI territory the insurance wont be tax deductible either. Is this right? I was thinking that it would be smarter to do that rather than incur selling / buying costs on another property. But if he's right I might be better off selling then buying a new IP & a new PPOR. Unfortunately don't yet have enough equity to avoid LMI on 2 properties....well not where I was thinking of buying anyway.

Talking again next week / getting valuations etc

He might be right.

But if you have ever redrawn from that loan he may be wrong as it would be the current loan less any withdrawals.

It might be better to sell, or it may not, just run the numbers.

 

[imbi3]

I am basically in the same boat. Just bought a new PPOR. Now need to decide whether to sell or keep current PPOR. Spoke to my accountant and was advised to sell and consolidate. Then again, my situtation could be different to yours

 

[tess85]

How much of your PPOR loan has been paid down or has it been IO with offset from the start (ideally)?

I'm in the same boat but my loan is IO and I'm *still* thinking about selling the PPOR... CGT free gains is tempting...

 

[imbi3]

How much of your PPOR loan has been paid down or has it been IO with offset from the start (ideally)?

I'm in the same boat but my loan is IO and I'm *still* thinking about selling the PPOR... CGT free gains is tempting...

Bought the property for $320k. Initial loan $300k. P & I with offset. Loan balance is now $245k with majority of it being offset. Property is now worth $450k. Would be positively geared now. Other option is to sell it to spouse for market value but it will attract stamp duty. I still have a few months to think about it while waiting for the purchase settlement

 

[tess85]

Switch it to IO anyway perhaps?

 

[Terry_w]

Bought the property for $320k. Initial loan $300k. P & I with offset. Loan balance is now $245k with majority of it being offset. Property is now worth $450k. Would be positively geared now. Other option is to sell it to spouse for market value but it will attract stamp duty. I still have a few months to think about it while waiting for the purchase settlement

Nomnal stamp duty on spouse transfers in VIC - $50 or so.

Seek legal and tax advice, but could work well in this instance.