Tax deductibility question on cash purchases

[spludgey]

My parents recently sold an apartment and have a few hundred thousand dollars in their account now.
Would I be able to borrow some of the money from them, buy a house with it as a "cash" purchase, then get a bank loan and return the money to my parents? Would the interest from the new loan then be tax deductible? Plus, would I have a problem obtaining finance, assuming that I'd have to list the money that my parents gave me as a liability?

 

[Aaron_C]

Plus, would I have a problem obtaining finance, assuming that I'd have to list the money that my parents gave me as a liability?

It should be OK but depends on the LVR. If LMI is involved it would be a difficult one trying to refinance a 'private' debt.

 

[Terry_w]

My parents recently sold an apartment and have a few hundred thousand dollars in their account now.
Would I be able to borrow some of the money from them, buy a house with it as a "cash" purchase, then get a bank loan and return the money to my parents? Would the interest from the new loan then be tax deductible? Plus, would I have a problem obtaining finance, assuming that I'd have to list the money that my parents gave me as a liability?

As long as you properly documented everything.

 

[Colin Rice]

If the property that the borrowed funds are used for is income producing then it should be tax deductible.

If the borrowed funds are used to repay your parents then it wont effect your serviceability as you are exchanging one debt for the other.

You wont have issues obtaining the funds as long as you can service the debt and the property is an acceptable security to the bank. Would pay to run some figures with a reputable MB before committing to ensure you can repay the debt to your parents.

 

[spludgey]

Thanks for your answers!

I've got a supplementary question though.
If I refinance, will I be able to get it done based on the market value or will the banks default back to the contract price?

 

[Terry_w]

Thanks for your answers!

I've got a supplementary question though.
If I refinance, will I be able to get it done based on the market value or will the banks default back to the contract price?

If you have settled already then any new loan will be on market value

 

[spludgey]

Excellent, thank you.

This seems like it might be a good way of saving at least a few thousand dollars.