Refinancing Properties

[myty22]

Hoping someone can set me straight on the rights and wrongs with the following scenario:

PPOR1: val $700,000 equ: $600,000
IP1: val $420,000 equ: $120,000
IP2: val $420,000 equ: $110,000

Now I'm looking at buying another PPOR for around $850,000 and out of the 3 properties above would like to keep my existing PPOR1 and rent it out. So sell IP1 and IP2.

Before then, can I take the equity out of the PPOR to pay off the Investment Properties, therefore still being able to claim the interest as I'm paying for an Investment? And then when I buy the new PPOR, refinance the PPOR1 property and only have very little equity left in it. Putting the equity from the sale of IP1 and IP2 into my new PPOR.

I guess what I'm really asking is ... is there a legal way of shifting the equity from my existing IPs to a new PPOR if the previous PPOR is to become an IP?

Hope that makes sense.

 

[Qlds007]

Yes the question makes perfect sense and is something we get asked about by clients almost weekly.

One way would be to look to sell the current PPOR into a Trust Structure borrowing 100% of the current market value and using the net surplus funds to purchase your next PPOR.

The purpose of the funds raised is for investment and therefore the interest is deductible and for you as an individual you can utilise the funds for any purpose.

Downside is that Stamp Duty is payable on the transfer but if the numbers are right it can still be well worth it.

 

[myty22]

Thanks for the reply. Seems like the stamp duty would be the problem. Other way I was thinking was to get my wife to sell her share to me (or vice versa). That way we'd at least have half of the equity.

 

[Qlds007]

Myty

Depending on the State in which the property is located you may still have Stamp Duty on a Transfer from hisband to wife.

Certainly in Qld this would the case.

$600K is a lot of equity to have tied up and not be able to claim the interest on it so maybe worth doing the exercise and seeing whether the Stamp Duty is worth incurring.