Purchasing PPOR with IP Equity

[Sonamic]

Hi all. Forgive the Newbie question. What is the most cost effective way to utilise IP Equity to reduce the purchasing Debt of a new PPOR?

I have 500k in Equity spread across 4 properties. Which at 80% Release is 400k to put towards a 600k PPOR.

What is the wisest path to achieve the desired result? Thoughts and advice welcomed.

 

[Jess Peletier]

Using equity to purchase a PPOR (in the absence of trusts/other structuring) is not a great decision tax wise - the debt will not be deductible.

Your PPOR debt will be 100% plus costs, all non-deductible. It's best to use cash for PPOR if possible and debt for IP's, but sometimes that can be hard to achieve, especially when you are a long term renter for eg, with a large equity position but not much cash.

There may be a way to get around it via trusts, but I'll leave that to the pro's to comment.

 

[Terry_w]

Hi all. Forgive the Newbie question. What is the most cost effective way to utilise IP Equity to reduce the purchasing Debt of a new PPOR?

I have 500k in Equity spread across 4 properties. Which at 80% Release is 400k to put towards a 600k PPOR.

What is the wisest path to achieve the desired result? Thoughts and advice welcomed.

Only 1 way and that is to sell.

Any borrowings would relate to use which is private and the interest therefore will not be deductible.

Sale may be on open market or to related parties.

 

[Sonamic]

As I thought. My current PPOR is one of the 4. 290k Debt with a 440k Val. All 4 recently converted to IO so this will assist in gathering cash for the next move as the 3 IP's are CF+. Which is another Tax conundrum itself. But not a bad one to have.

Thanks.