All,
If I have a 80% loan currently secured on my PPOR for which the purpose was the PPOR, and then I do a top up to 90% (capitalizing LMI) to make funds available for investment purposes I think it could be reasonably argued that the LMI is an investment expenses as is only required for the additional borrowing (which is for investments).
If so, then the LMI would be deductible over 5 years and the additional interest on the loan (from the capitalized lmi) would be deductible.
This old thread discusses this is more detail "http://somersoft.com/forums/archive/index.php/t-4451.html".
However, what happens if there is a delay between setting up the new top up and using it for investment purposes? Say I get this set up as a IO loan - initial balance of $18k (the LMI) with drawdown available $150k. Then left it there for a year while I was searching for a good investment.
After a year I find my investment, and drawdown the $150k.
What is deductible in the first year?
What is deductible in the five years after that?
Is the first years deductability of the LMI lost as the loan wasn't used for an investment at that point?
Regards,
Jason
If I have a 80% loan currently secured on my PPOR for which the purpose was the PPOR, and then I do a top up to 90% (capitalizing LMI) to make funds available for investment purposes I think it could be reasonably argued that the LMI is an investment expenses as is only required for the additional borrowing (which is for investments).
If so, then the LMI would be deductible over 5 years and the additional interest on the loan (from the capitalized lmi) would be deductible.
This old thread discusses this is more detail "http://somersoft.com/forums/archive/index.php/t-4451.html".
However, what happens if there is a delay between setting up the new top up and using it for investment purposes? Say I get this set up as a IO loan - initial balance of $18k (the LMI) with drawdown available $150k. Then left it there for a year while I was searching for a good investment.
After a year I find my investment, and drawdown the $150k.
What is deductible in the first year?
What is deductible in the five years after that?
Is the first years deductability of the LMI lost as the loan wasn't used for an investment at that point?
Regards,
Jason