Tax Deductability of Loan Switch Fees

[Gary.G]

Hi,
I have a 5yr Investment Loan Fixed @ 8.95% that I want to swap to a standard variable with CBA. (6 months into loan)

The switch fee is around $26,000 but I figure it is worth it with predictions of interest rates dropping to below 5% by Easter next year. My calculations show I could save over $37,000 over the 5 years.

My question regards the $26,000 switch fee. I intent to put this on an Investment LOC I have. Is the $26,000 or the Interest I would pay on this TAX DEDUCTABLE in any way ???

Cheers
Gary

 

[boomtown]

I went to an ATO rental lecture and seem to remember the bloke saying that that loan fees on IP (including exit fees) are 100% tax deductable.

 

[jingo]

Hi,
I have a 5yr Investment Loan Fixed @ 8.95% that I want to swap to a standard variable with CBA. (6 months into loan)

The switch fee is around $26,000 but I figure it is worth it with predictions of interest rates dropping to below 5% by Easter next year. My calculations show I could save over $37,000 over the 5 years.

My question regards the $26,000 switch fee. I intent to put this on an Investment LOC I have. Is the $26,000 or the Interest I would pay on this TAX DEDUCTABLE in any way ???

Cheers
Gary

Hi Gary,

Not sure that I would be switching based on predictions. These can turn ot to be wrong. Sure is a lot of money in switching fees. I would want to do my sums on 6.5% and see if it is still worthwhile before going ahead.

Just food for thought. I have some loans that I have considered bringing off a fixed rate - but the break fees are way too high.

 

[Gary.G]

Hi Gary,

Not sure that I would be switching based on predictions. These can turn ot to be wrong. Sure is a lot of money in switching fees. I would want to do my sums on 6.5% and see if it is still worthwhile before going ahead.

Just food for thought. I have some loans that I have considered bringing off a fixed rate - but the break fees are way too high.

Yes, the fees are very expensive, I wish I had done it a month ago when the switch fees would only have been in the hundreds, not thousands.
I have done up a spreadsheet which also takes into account the interest I will be paying on the $26,000 to repay over 5 years.

The break-even point is around 7% and anything below that will be a savings.
At 5% I would be savings around $37,000 over 5 years.

At 6.5% I would have a savings of around $13,000 over 5 years.
I am using 5 years as that is the term of the fixed rate.

Cheers
Gary

 

[Humphrey]

Any idea how they calculate these break fees?

 

[alexk]

Yes, the fees are very expensive, I wish I had done it a month ago when the switch fees would only have been in the hundreds, not thousands.
I have done up a spreadsheet which also takes into account the interest I will be paying on the $26,000 to repay over 5 years.

The break-even point is around 7% and anything below that will be a savings.
At 5% I would be savings around $37,000 over 5 years.

At 6.5% I would have a savings of around $13,000 over 5 years.
I am using 5 years as that is the term of the fixed rate.

Cheers
Gary

Hi Gary,

I am exactly in the same situation (~340K fixed loan and 3 moreyrs to go) like you and was trying to calculate the break fee (my bank, also CBA, will ask for it eventually, if I decide to switch to varable). It looks like you already have some sort of calculation tool or you have created it yourself (excel file ??) and I would be greateful if you can send it to me.

Cheers,
Alex