Hi Everyone, sorry for the mini essay below to state my scenario.
I have a scenario which I believe could be quite common. I thought it was logical but have been told initially by my bank manager that it MAY not be ok and my tax accountant today says it's NOT ok. Here goes with made up figures:
1) Currently live in a principle residence valuated at $400,000 with $150,000 still owing, therefore have $250,000 in equity. $300 per week rental potential.
2) I want to upsize to a bigger house which costs $800,000. Instead of selling my existing $400,000 house, I want to convert it to an investment property.
3) This would then mean I have $950,000 total in loans. I will be taking out new loans to finance both homes via two separate loans.
4) I thought that I could formulate my loans using my $250,000 equity in my exisiting house. Have my existing house loan created at $400,000 for investment purposes and $550,000 loan for the new principle residence. I was hoping to do this to maximise negative gearing.
5) But I have been told this is not ok due to the intent of the usage for the $250,000 equity for non-investment purposes and cannot be claimed for negative gearing purposes. This is going to kill me a little if all I can claim is the existing $150,000 loan as it will be massively postively geared.
6) An argument is, what is the difference if I sold my existing house with $250,000 cash difference, bought my $800,000 with a $550,000 loan and then purchased a house for investment purposes for $400,000?
7) Does it make a difference if I'm creating new loans for each property?
8) Bank manager willing to change loans to what I want.
9) Could I get a second opinion from a different specialist? Financial adviser?
Many thanks in advance for any advice!
I have a scenario which I believe could be quite common. I thought it was logical but have been told initially by my bank manager that it MAY not be ok and my tax accountant today says it's NOT ok. Here goes with made up figures:
1) Currently live in a principle residence valuated at $400,000 with $150,000 still owing, therefore have $250,000 in equity. $300 per week rental potential.
2) I want to upsize to a bigger house which costs $800,000. Instead of selling my existing $400,000 house, I want to convert it to an investment property.
3) This would then mean I have $950,000 total in loans. I will be taking out new loans to finance both homes via two separate loans.
4) I thought that I could formulate my loans using my $250,000 equity in my exisiting house. Have my existing house loan created at $400,000 for investment purposes and $550,000 loan for the new principle residence. I was hoping to do this to maximise negative gearing.
5) But I have been told this is not ok due to the intent of the usage for the $250,000 equity for non-investment purposes and cannot be claimed for negative gearing purposes. This is going to kill me a little if all I can claim is the existing $150,000 loan as it will be massively postively geared.
6) An argument is, what is the difference if I sold my existing house with $250,000 cash difference, bought my $800,000 with a $550,000 loan and then purchased a house for investment purposes for $400,000?
7) Does it make a difference if I'm creating new loans for each property?
8) Bank manager willing to change loans to what I want.
9) Could I get a second opinion from a different specialist? Financial adviser?
Many thanks in advance for any advice!