Loan question

[Success]

We have a LOC now available after paying off PPOR. This LOC is under both my wife and my name.

We are wanting to purchase an IP and take on a fixer upper project under my wife's name.

Reason is that my wife does not work and has capital gains losses she is carrying from GFC share disaster.

So ... can we purchase IP under my wife's name and deduct all interest from our loan even though loan is under joint name ?

The challenge is getting a loan under my wife's name only as she in not employed.

Appreciate any input/thoughts on situation above.

 

[tobe]

Yes, most lenders will let you be both on the loan and only your wife on title.

I take it your planning to fix it up and then sell the property? The capital gains can then offset the previous losses?

the interest and other holding costs cant be deducted from the capital loss, only from any income the property or your wife might make.

Seems like a lot of trouble to go to, and a fair bit of risk.

Why not just buy and hold a fixer upper? Leave the capital losses there for later?

 

[Peter_Tersteeg]

The tax implications of a property are usually related to the ownership of the property, not the names on the loan.

There can be some mitigating circumstances so it's a good idea to get specific tax advice, but generally if only your wife is on the title of the property, then all profits (and losses) will be attributed to her, along with the tax implications from that.

It's not a big deal to have both of you on the loan under these circumstances. It happens all the time.

 

[Paul@PFI]

Before committing to a sole owner I would consider:
1. How long will it be owned
2. Is intention to reno and flip and make a profit ? If so is it a CGT issue at all ??
3. Might there be neg gearing before it is sold ?? If wifey earns no income this may be a mistake.

#3 may be a loss when loan interest and depreciation / capital allowances are all factored in.

 

[Corey Batt]

Certainly not an issue from the lending side, this is quite common with spouses structure wise. Paul has touched on some of the tax aspects however that need to be considered - the short, medium and long term consequences can quickly change peoples views on their desired structure.

 

[Colin Rice]

You can also divide the property ownership into as little as 1% for one party and 99% for the other if you wanted to still be on the title.

Some banks require a minimum of a 90/10 percentage split and others are fine with a 1% stake.