How Can I Maximise My Deductible Debt?

[Newbie73]

I guess I made a classic newbie mistake when I didn't do this from the beginning!

I now have approx 100k of debt on IP worth around 230k and 270k debt on new PPoR worth approx 400k.

The investment loan is on a fixed rate for at least the next two years (I think it is somehwere around 2.5 years to go but not sure).

Is there ANYTHING that I can do that will make more of my debt deductible???

Thanks for your help!

 

[yo yo ma]

Hi N73
Make sure your IP is interest only & that all extra funds go towards paying off your PPOR into a 100% offset account against your PPOR. You can then withdraw these funds if needed.

You cannot increase the loan for the IP (you could but only the $100k would be deductable)... it is the purpose of the loan that counts.

Only other way would be to sell the IP back to yourself or a trust but this would incur stamp duty & other costs, so probably wouldn't be worth it.

Most important thing is to learn from your mistake... we all make them
Steve

 

[yo yo ma]

And you could also look at capitalising the interest
http://www.somersoft.com/forums/showthread.php?t=26532
Steve

 

[Newbie73]

Thanks

Thanks Steve

Guess I will concentrate on paying off the PPoR and put that one down to experience when it comes time for the next property....

 

[alexlee]

Don't be TOO hard on yourself. For every 100k of debt the value of it being deductible is only about $2k a year. Which isn't TOO much. You might as well focus your energy more on saving money and investing.
Alex

 

[skater]

You have plenty of equity in your PPOR, so you could get a LOC for the max $ you can & use this for investment purposes. This could mean shares or deposit on another property, but it could also mean expenses for your existing one.

For example, pay the rent you receive from your current IP into an offset account against your PPOR (or directly into your PPOR if you prefer), then pay the interest payable on your IP loan from your new LOC. Pay your rates, insurance, maintenace etc out of the LOC too.

By doing this, you will slowly change your non-deductable into deductable.

 

[WinstonWolfe]

Move into your IP and rent out your PPR.
or
Move into someone else's rental property and rent out both of yours.