To refinance or not? thoughts please

Hi

I currently have a PPOR that i have lived in for 2 years.
Purchased for $345000, still owing $210000 with $65000 in the redraw. It is on a discount home loan with no swapping to another loan, and as such i believe the only way for me to change to an IO with offset is to refinance.

Through my recent research i have found out that a redraw isn't all it's cracked up to be and an IO with offset would better suit my investment needs (i intend to rent out my PPOR).

If i choose to refinance can i take out the $65000 in the redraw and refinance on the actual loan, around $275000 then put the $65000 into the offset. This would also help with the future tax deduct-ability of the loan.

Does my plan sound ok and does anybody have ballpark figures for refinancing?

Thanks heaps.
 
no, whats done is done. Id suggest investigating refinancing if there isnt too much of a cost involved. As to the money already paid into redraw, you can only claim this portion if you draw it out again and use it for an investment purpose. You can also have a look into debt recycling.

In the end, your not in the perfect position, but its far from an awful position. Its a great thing to be ahead on your home loan.
 
As tobe has mentioned, by refinancing and putting the funds into offset in the future, this will not solve your redraw issue. The current balance will be the only deductible portion of the loan at this time.

If you rent out your PPOR, are you intending to purchase another property, or rent? One option is to draw out those redraw funds out for investment property deposits (preferably in a new split for now) which will recycle the funds into deductible debt.
 
Is there any specific way that i would need to withdraw the money from the redraw to keep it tax deductible? like keep it in a separate account for investing? or just show that i used the money as a deposit?

if i was to refinance would i need to withdraw the money for investing before i refinance?

i believe that the value of my PPOR has risen about $20000 since purchase. when i refinance would i be able to get that extra money as cash and then leave it in the offset?
 
Is there any specific way that i would need to withdraw the money from the redraw to keep it tax deductible? like keep it in a separate account for investing? or just show that i used the money as a deposit?

if i was to refinance would i need to withdraw the money for investing before i refinance?

i believe that the value of my PPOR has risen about $20000 since purchase. when i refinance would i be able to get that extra money as cash and then leave it in the offset?

Redrawing money from a loan is consider new borrowings. So the interest would only be deductible if that money is used for investment related purposes.

If your loan is, for example, currently $40,000 with $30,000 available in redraw with a property value of $100,000 then I would suggest refinancing like this:

$40,000 original loan IO (offset if you only loan, if buying another PPOR, no offset)
$40,000 LOC (this being 80% of the property value less the original loan).

The LOC can be used to pay rates, insurances and other property expenses which will free up your cash for your new home loan, or, if you won't have one, to park in the offset.
 
Redrawing money from a loan is consider new borrowings. So the interest would only be deductible if that money is used for investment related purposes.

If your loan is, for example, currently $40,000 with $30,000 available in redraw with a property value of $100,000 then I would suggest refinancing like this:

$40,000 original loan IO (offset if you only loan, if buying another PPOR, no offset)
$40,000 LOC (this being 80% of the property value less the original loan).

The LOC can be used to pay rates, insurances and other property expenses which will free up your cash for your new home loan, or, if you won't have one, to park in the offset.

I recently purchased my first IP and redrew $14000 straight out of this home loan and used it straight away for the deposit for the IP. This $14000 is now tax deductible?

Im still not 100% on how refinancing works in the way of equity. If my property has risen in value by $20000 can this get added onto the new loan and given to me in cash?
 
I recently purchased my first IP and redrew $14000 straight out of this home loan and used it straight away for the deposit for the IP. This $14000 is now tax deductible?

Im still not 100% on how refinancing works in the way of equity. If my property has risen in value by $20000 can this get added onto the new loan and given to me in cash?

In that case the interest on this $14,000 may be deductible (depending how you did it all). So you should segregate this loan from other non-deductible debt, normally. But in your case all the loan interest would be deductible (assming no other redraws have been made) so no real reason to create a separate split.
 
thanks for your help. i guess my next step is to get onto my mortgage broker when hes back from holidays and get it all sorted out.
 
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