Converting PPOR to IP and using a bit of equity to purchase new PPOR

[komstak]

For example:

Current PPOR:
Value: 500K
Offset: 100K
Loan: 350K, 50K redraw

If I wanted to buy a new PPOR using the offset (100K) and redraw facility (50K) as deposit, and convert my current PPOR to an IP, would there be a problem if my current loan goes up from 350K to 400K? Come tax time I would point out to my accountant that 50K was used for non-investment purposes and it's a one-off withdrawal. I haven't used the redrawal facility for any other personal expenses. Would this complicate things?

 

[Simon]

It would.

You can freely use the offset money for the new home.

If you draw the redraw cash then your IP loan will be 6/7 deductible for the rest of it's lifetime.

If you need the redrfaw for your PPOR then by all means use it. You just have to remember to deduct the same % from your interest claim each year.

Can you redraw it to buy another investment?

 

[komstak]

It would.

You can freely use the offset money for the new home.

If you draw the redraw cash then your IP loan will be 6/7 deductible for the rest of it's lifetime.

If you need the redrfaw for your PPOR then by all means use it. You just have to remember to deduct the same % from your interest claim each year.

Can you redraw it to buy another investment?

Thanks Simon. Just want to confirm - isn't it 7/8 instead of 6/7? Yup, I could try to buy another investment or leave it for the moment to buy another iP in the future depending on serviceability... just wanted to check my options. Thanks for the info.

 

[Simon]

Forget redraw - that is a distraction.

You have a loan of $300K.

You want to increase it by $50K for personal use. New loan is $350K.

The $350K will be 6/7 deductible.