equity in current home & moving into cheaper home

[wnddarren]

I currently have a mortgage of $250k and my house is worth approx $450k and it cost me approx $280k to build 4 years ago. I am thinking of buying a cheaper house to live in and rent out my current house.
Is it possible to take the $200k equity (or part of) out of my existing home and use it to pay off the cheaper home that I will be moving into? The mortgage then on my existing home(to become a rental) would be $450k and when it is rented out I could claim tax back on the interest on $450k.
Thanks Darren

 

[Rolf Latham]

Hi Darren

In short, no, because the funds released will be to buy a new PPOR

Depending on ur circumstances a well constructed Debt recycle policy may be helpful to more quickly convert the non deducctible debt to deductible.

ta
rolf

 

[artlez]

If you take 200k out to use it on non-investment purposes like a new home to live in, your future IP will lose its full tax deductability!

 

[tubs]

No it won't.

You will get a second loan on your current house for $200k.

Your original loan of $250k will be deductable once you rent out your current house.

But the new loan won't be because you're using it for a different house.

 

[wnddarren]

Thanks, who would I need to contact to get more info on a debt recycle policy, would it by an accountant or mortgage lender etc? What sort of circumstances could affect this option?

 

[wnddarren]

No it won't.

You will get a second loan on your current house for $200k.

Your original loan of $250k will be deductable once you rent out your current house.

But the new loan won't be because you're using it for a different house.

Thanks Tubs, this is how I thought it worked also based on a property I had about 7 years ago. I used the equity in a unit I was living in as a deposit on a house I bought to live in. The loan increased by 30k on the unit but I could not claim any thing on that 30K when the unit was rented. I was hoping maybe there was some way around it such as what Rolf mentioned. Thanks again

 

[Rolf Latham]

Huy Wnd

most mortgage brokers wont have a clue, and most lenders even less.

You need a decent savvy broker in this area, AND an accountant that gives their blessing

This SA fella posts here a bit and seems to know what hes on about

Brett

[email protected]


ta

rolf