How to upgrade PPOR but keep tax treatment of investment loans secured against PPOR

[Trogdor]

Hi All,

My situation is that I have a "paid off" PPOR from a non-deductible perspective, but against which I have borrowed back up to c. 55% for deposits for my CIPs. The PPOR is not cross collateralised.

At some point in the next 18 - 36 months I think I'd like to upgrade the PPOR.

The question is, how can I sell, upgrade, and keep these loans as tax deductible - as I presume when I sell the lender (ANZ) will want to discharge all loans secured against that property, which would then cause my deductible debt to be extinguished, and my new PPOR to have a much higher level of non-deductible debt?

Is there a way I can "transfer" these loans to be secured against the new PPOR, and have the sale proceeds of old PPOR used to pay down new PPOR's non-deductible debt?

Thanks!!

 

[Rolf Latham]

Hi All,

My situation is that I have a "paid off" PPOR from a non-deductible perspective, but against which I have borrowed back up to c. 55% for deposits for my CIPs. The PPOR is not cross collateralised.

At some point in the next 18 - 36 months I think I'd like to upgrade the PPOR.

The question is, how can I sell, upgrade, and keep these loans as tax deductible - as I presume when I sell the lender (ANZ) will want to discharge all loans secured against that property, which would then cause my deductible debt to be extinguished, and my new PPOR to have a much higher level of non-deductible debt?

Is there a way I can "transfer" these loans to be secured against the new PPOR, and have the sale proceeds of old PPOR used to pay down new PPOR's non-deductible debt?

Thanks!!

A simple way if you can make it work, is to use portability.

The loan(s) are ported to the new property.

A back to back ( same day) settlement can simplify this process, however the lender should be able to take a term deposit to secure the existing loans for a little while if you cant get a same day settlement.

Sometimes this doesnt work financially where the loans arent deductible, but in your case, I cant see how this would not work for you

ta
rolf

 

[Aaron_C]

Try a security substitution with your current lender when you buy the new place.

 

[Terry_w]

you just need to substitute the security.

easiest way is to buy the new ppor before selling the old.

another way is to increase existing loans on the properties and refinance the portion that was used for initial deposits.

 

[Peter_Tersteeg]

The biggest problem with portability is that it requires a same day settlement between the old property that you're selling and the new one that you're purchasing. You can get around this to a degree, but there's a lot of variables involved.

Another thing you may be able to do if you've got enough equity in the investment properties, is move the investment loans secured by the current PPOR over to those investment properties, giving you clear title to your current PPOR. This could also be achieved through portability if the IPs are held with the same lender as the PPOR.

You then sell the current PPOR, use the cash to purchase the next PPOR.

Probably a cleaner and easier solution, provided the IPs are worth a sufficient amount.

 

[Trogdor]

Thanks guys, that is very helpful!!