Turning a home into an investment

[jayhunter2000]

From: Jay Hunter


Hi All,

If I was to buy a unit (this being my first home) and get the 7K FHOG and have a home loan of about 240K. That would be just a standard non deductible loan (not too good)... This is fine as it is where we want to live and we get the 7K (don't want to waste it) BUT I can foresee that in about 12 months the place could be too small for us.

What are our options for turning this place into an investment and making the remainder of the debt (debt left after 12 months) tax deductible (whilst we rent it out) ?

I was thinking if we have the 100% offset account we could put any additional payments into bank account rather than the loan (just pay min on loan)... keeping the debt up high whilst paying interest on a lower amount... and when we make it an investment we will still have a high loan to offset the rent. (we can then use the saved money for a deposit on another place) ?? any help would be great.

in short, is there a way of getting a long term investment property (property will have high cap gains) but still get the 7k FHOG ? we cannot afford to get both an investment prop and home in the location we want.


thanks,
jay

 

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Reply: 1
From: Sergey Golovin


Jay.

Buy your self a unit using $7K (FHOG) stay there for 12 months.

When you are ready to make next move change that loan from residential to investment.

Buy your self another place and rent the previous one out.

Too easy.

Serge.

 

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Reply: 2
From: Terry Avery


Jay, don't get confused about the deductibility of interest. While you live
in the unit you cannot claim the interest but once you receive rent then you
can claim the interest as a deduction. It should not be necessary to change
the loan from residential to investment as generally the conditions for both
loans are the same. Check with your bank though that this is the case.

 

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Reply: 2.1
From: Scott Marshall


Don't need to change loan, just tell the bank AND the insurance company, as they need to know if it is
1. Owner Occupied
2. Rented out
3. Vacant

Scott

 

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Reply: 2.2
From: James Johnson


T avery,
Isn't an investment loan a few interest points above a home loan? And if you do have to switch between them, what kind of fees would you be paying?
ZCheers
Jinmmy

 

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Reply: 2.2.1
From: Terry Avery


Hi Jimmy,

If you look at the advertised rates they seem to be the same for IP loans
and own homes. You don't have to switch between them unless you are
switching to a better deal. 14 years ago we were paying off our own home and
moved because of work. At that time there was a substantial difference in
rates between the different types so one tended not to inform the bank as
they would charge you the higher interest rate but there was no change in
loan documents. Nowadays the banks don't seem to worry about it and charge
the same rates for both kinds of loans.

Even if you tell the bank I wouldn't think there would be a charge for this.
You might want to ask one of our brokers such as Rolf or Victor....

Cheers