Gov charges for accessing equity

[RedApple]

Hi All,

I'm trying to extract some equity from an IP in NSW to fund another IP purchase. The equity I'm accessing is only 20k but there's a gov charge of about $850....that's over 4%

The banker says this is a NSW gov charge for borrowers who wish to increase their existing morgage. The higher the fund the greater the fee. Is this true ?

I've accessed equity from a VIC IP before but didn't have this fee.

Isn't this similar to paying stamp duty twice ? as the new IP to be purchased will have stamp duty on the purchase price but the extracted equity to be used as deposit will also have have a gov charge at similar or even higher rate ?

 

[Aaron_C]

That is mortgage stamp duty. It is not payable as long as you sign the declaration with the mortgage docs that you aren't using the mortgage funds for business/commercial purposes. Don't worry.

 

[RedApple]

Thanks Aaron!!!

So that fee is not payable for residential IP purchases ?

That is mortgage stamp duty. It is not payable as long as you sign the declaration with the mortgage docs that you aren't using the mortgage funds for business/commercial purposes. Don't worry.

 

[Aaron_C]

Thanks Aaron!!!

So that fee is not payable for residential IP purchases ?

Yes, that's right. The bank 'charges' it anyway (to be safe) but it isn't charged for resi stuff.

 

[Rolf Latham]

That is mortgage stamp duty. It is not payable as long as you sign the declaration with the mortgage docs that you aren't using the mortgage funds for business/commercial purposes. Don't worry.

Payable for personal investment in shares too I think

ta
rolf

 

[jonmardell]

there is a declaration you can sign so you will not be charged. Most banks include it in their loan offers as they can't charge it if it applies if it is not included. Below is a link to explain it.
http://www.osr.nsw.gov.au/taxes/mortgage/

Hi All,

I'm trying to extract some equity from an IP in NSW to fund another IP purchase. The equity I'm accessing is only 20k but there's a gov charge of about $850....that's over 4%

The banker says this is a NSW gov charge for borrowers who wish to increase their existing morgage. The higher the fund the greater the fee. Is this true ?

I've accessed equity from a VIC IP before but didn't have this fee.

Isn't this similar to paying stamp duty twice ? as the new IP to be purchased will have stamp duty on the purchase price but the extracted equity to be used as deposit will also have have a gov charge at similar or even higher rate ?

 

[RedApple]

Thanks Aaron, so the bank can just 'charges' it anyway ???
I spoke to the banker today...he seems abit clueless with this and so was the guy who's more senior at the branch.... They advised the loan department will determine if it's chargable or not then would deduct accordingly considering this is a gov charge hence the bank would be out of pocket if they can't pass this charge to the customer =/

Yes, that's right. The bank 'charges' it anyway (to be safe) but it isn't charged for resi stuff.

 

[RedApple]

Hi Rolf, for NSW alone ?

I extracted some equity from a VIC IP recently and saved it in a standalone offset account in case the funds might be needed. I asked my fav banker (who's currently on leave) if this could be used to purchase shares and he said yes! There was no morgage duty charged.

Payable for personal investment in shares too I think

ta
rolf

 

[RedApple]

Many thanks jonmardell !!!

I'll forward this link to the banker tomorrow. He googled NSW morgage duty today as we're from VIC but landed on a site which said advance made on an existing morgage is subject to duty so it appears to him that the duty is payable but advised me to contact the OSR to be sure.

There is a form that came with the loan docs for the borrower to sign and declare the funds is to be used to purchase an investment property, but doesn't have anything regarding morgage duty exemption on it... hope this is the one you guys are referring to.

there is a declaration you can sign so you will not be charged. Most banks include it in their loan offers as they can't charge it if it applies if it is not included. Below is a link to explain it.
http://www.osr.nsw.gov.au/taxes/mortgage/

 

[Aaron_C]

Thanks Aaron, so the bank can just 'charges' it anyway ???

I should explain. They make an allowance for it as per legal requirements but once you sign the declaration it will no longer be charged.

 

[RedApple]

oooh goodie thanks Aaron !!

I should explain. They make an allowance for it as per legal requirements but once you sign the declaration it will no longer be charged.

 

[s0805]

I extracted some equity from a VIC IP recently and saved it in a standalone offset account in case the funds might be needed. I asked my fav banker (who's currently on leave) if this could be used to purchase shares and he said yes!

RedApple,

bit off topic here...but as above, have you confirmed this with your accountant that borrowed money sitting in offset (until required) to buy shares OR may be IP can be tax deductible....