Sell a unit to buy a house or borrow full amount for a house and rent out the unit

Hi all,
I can't seem to make a decision on whether to sell my unit in order to buy a house or take a mortgage for the full amount of house price and keep the unit as an investment and rent it out to help with repayments.
Here are some details:
I have a mortgage on my unit which has been fully repaid, although I keep the loan open and can still redraw money if I need to. However, I now need a bigger place to accommodate my growing family.
I have enough equity to borrow 100% and buy a house.
From monthly cash flow point of view I'd be better off to sell the unit and, therefore, borrow much less money to buy a house and pay less interests overall than to pay interest on the 100% loan of the purchase price, rent my loan free unit, pay taxes on rental income and not being able to tax deduct any interests on the new house loan.
From long term investment point of view I should keep the unit as an investment as its value has been growing at the higher rate than the bank mortgage interest rates. Considering all costs associated with buying an investment property such as stamp duty I am trying to find a way and justify monthly out of pocket cost to keep the unit as an investment. However, I might be stretching my monthly budget and be on a strict cash flow regime.
Has anyone been in this situation? Please share your thoughts. What did you do? Or what would you do?
 
Hi all,
I can't seem to make a decision on whether to sell my unit in order to buy a house or take a mortgage for the full amount of house price and keep the unit as an investment and rent it out to help with repayments.
Here are some details:
I have a mortgage on my unit which has been fully repaid, although I keep the loan open and can still redraw money if I need to.

If you redraw for personal borrowing, it won't be tax-deductible.

However, I now need a bigger place to accommodate my growing family.
I have enough equity to borrow 100% and buy a house.
See above
From monthly cash flow point of view I'd be better off to sell the unit and, therefore, borrow much less money to buy a house and pay less interests overall than to pay interest on the 100% loan of the purchase price, rent my loan free unit, pay taxes on rental income and not being able to tax deduct any interests on the new house loan.
Yep, sucks doesn't it?
From long term investment point of view I should keep the unit as an investment as its value has been growing at the higher rate than the bank mortgage interest rates. Considering all costs associated with buying an investment property such as stamp duty I am trying to find a way and justify monthly out of pocket cost to keep the unit as an investment. However, I might be stretching my monthly budget and be on a strict cash flow regime.
Has anyone been in this situation? Please share your thoughts. What did you do? Or what would you do?

There may be a clever way of structuring such a purchase, but it's beyond me, sorry. You might be better off selling the unit, then re-borrowing to buy something else, once you have your PPOR.
 
Consider spousal sale - depending on the ownership now and the state there could be full or partial stamp duty exemption.
 
I hope this question isn't silly but... could you not still withdraw equity to purchase a PPOR and forgo tax-deductibility?

What would be the downsides?

Yes you can withdraw the equity. The downsides are that you pay tax on the rental earnings, but still pay full whack for your PPOR borrowings, without any deductions, so it's a double whammy.
 
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