Redraw: Converting PPOR into IP

[narcissusford]

Hi all

I made the mistake of making significant overpayments into my mortgage account of my PPOR instead of putting these funds into the offset acct. I was, at the time, unaware that the ATO treats redraw facilities differently from offset facilities. I now wish to convert my PPOR into an IP.

By way of background, my PPOR is worth approx $450k, and I have $100k left on the loan. I also have $150k in the mortgage account available for redraw (this being the overpayment).

If I pull my $150k out of the mortgage (as I will be using this as a deposit on the purchase of a new residence), is it possible for me to then refinance the dwelling, thereby ensuring that I can maximise interest deductions?

My instincts are telling me that this is not possible, but I thought I'd check with the experts...

 

[Terryw]

If I pull my $150k out of the mortgage (as I will be using this as a deposit on the purchase of a new residence), is it possible for me to then refinance the dwelling, thereby ensuring that I can maximise interest deductions?

My instincts are telling me that this is not possible, but I thought I'd check with the experts...

Refinance is just paying one loan out with another. The purpose of the loans wouldn't change and so if it is not deductible now then it wouldn't be when refinancing.

Have you thought about borrowing to pay expenses associated with this property? This may help a little bit.

 

[Marjac]

As TerryW has said entirley depends of the purpose/use of funds

The only simple way to do this, depending on your finances etc, is to redraw the $150k or part thereof to purchase a second IP which would probably result in also needing to borrow more for your PPOR