Finance

[WebBoard]

From: Mike .


help on refinancing
From: Eddym
Date: 5/24/00
Time: 11:18:11 AM

Part of Bill's article (16.4) on Henry Kaye's seminar, dealth with refinancing an IP and I was particularly interested in this concept of revaluing periodically. How would you go about that..get a qualified valuer to do the valuation or use the valuer used by you financial institution?

An example: If I have it correct: Assuming you borrowed 100% initially, if you had a property that you purchased 6 months ago at 200K and today it is worth say 250K, based on valuations, you would borrow an additional 50K and you would be able to keep the 50K (or use it to pay off a first mortgage, new investment property etc???

How does that sit with the ATO? Has anyone in the forum actually done/does this? Eddy

 

[WebBoard]

Bob

Reply: 1
From: Mike .


Re: help on refinancing
From: Bob
Date: 5/24/00
Time: 1:06:42 PM

I noticed that one too. As I understand it, if you have your house revalued and borrow more money, the interest is only tax deductible if it is used for investment purposes (ie not paying off the mortgage on your own home). So there'd be no point in doing it if the interest rates on the IP and your house were the same, plus you'd have the devil's own time trying to sort out your tax records. If you were to use it to pay off the mortgage on another IP, or to purchase a new IP, then you should be fine.

Of course, I'm just a bloke with an opinion.

 

[WebBoard]

Eddym

Reply: 1.1
From: Mike .


Re: help on refinancing
From: eddym
Date: 5/24/00
Time: 4:11:23 PM

G'day Bob, Dont worry about having an opinion..thats what I asked for.

The interest on my first mortgage is 7% whereas my investment property is currently 7.39%. My main aim in borrowing against the investment property is transferring that debt from my first mortgage to the investment property - where all the interest can be claimed as a deduction.

I think accounting wise it would be pretty straight forward, so dont anticipate I would have a problem sorting out tax return.

Ill let you know if I find out anymore details. Thanks,Eddy

 

[WebBoard]

Sue1

Reply: 1.1.1
From: Mike .


Re: help on refinancing
From: Sue1
Date: 5/24/00
Time: 9:38:10 PM

Eddym, If you borrow the money against your IP and use it to pay down your place of residence, the loan is NOT tax deductible.

Its what you use the money for, not what you secure it against that makes it tax deductible.

Even though you have borrowed the money against your IP and it is secured against it, as soon as you pay that loan off your home where you live or anything else that is not for investment purposes you are disqualified from claiming a tax deduction.

It would be good if you could just transfer the debt owing on your home which is at a higher interest rate to the debt on your IP at a lower interest rate (and tax deductible) but you cant. Many people have tried and failed.

The only way to make the new equity you have acheived in your IP work for you is to use it as a deposit for a new IP or other investment purpose. The ATO does not count your place of residence as an "Investment".

Sue1

 

[WebBoard]

Eddym

Reply: 1.1.1.1
From: Mike .


Re: help on refinancing
From: eddym
Date: 5/25/00
Time: 1:27:55 PM

Thank you Sue for that clear response, I thought that might be the case, regards, Eddy