Hi All,
I've read many of the offset / IP loan / tax deductibility threads but still can't get my head around my own situation.
I once had this scenario:
PPOR loan = $200,000
IP loan = $248,000 ; secured against IP only
Equity LOC (for investment purposes) = $200,000 ; secured against PPOR
(Therefore total debt limit : $648,000, "investment" debt : $448,000)
The LOC was almost fully drawn and I still needed a buffer for interest repayments , so I applied for a $50K increase. The existing lender wouldn't do it, so my mortgage broker suggested a re-finance.
That went ahead and when I had to sign the refinance documents, I was handed this scenario:
new PPOR loan = $200,000
new IP loan = $500,000 ; secured against IP and PPOR
,
effectively incorporating the original 248K + 200K IP loans, with
cash in a new a/c = $52,000
(Therefore total debt "amount" still $648,000, although I realise the debt limit is now $700,000)
It was suggested I should put the 52K cash in an offset a/c against the new $500K loan, so that I wouldn't pay 'more' interest than what I had been paying ie. "investment" debt would still be: $500,000 - $52,000 (from offset a/c) = $448,000.
Now to the question (thanks for getting this far):
Do I really need to keep that $52K in an offset a/c against my $500K loan to maintain full tax deductibility of that loan?
Put another way: The new lender gave me a bigger loan (for investment purposes) on the refinancing, then put $52K into an ordinary savings account - can that money be used to pay down my PPOR?
I've read many of the offset / IP loan / tax deductibility threads but still can't get my head around my own situation.
I once had this scenario:
PPOR loan = $200,000
IP loan = $248,000 ; secured against IP only
Equity LOC (for investment purposes) = $200,000 ; secured against PPOR
(Therefore total debt limit : $648,000, "investment" debt : $448,000)
The LOC was almost fully drawn and I still needed a buffer for interest repayments , so I applied for a $50K increase. The existing lender wouldn't do it, so my mortgage broker suggested a re-finance.
That went ahead and when I had to sign the refinance documents, I was handed this scenario:
new PPOR loan = $200,000
new IP loan = $500,000 ; secured against IP and PPOR
,effectively incorporating the original 248K + 200K IP loans, with
cash in a new a/c = $52,000
(Therefore total debt "amount" still $648,000, although I realise the debt limit is now $700,000)
It was suggested I should put the 52K cash in an offset a/c against the new $500K loan, so that I wouldn't pay 'more' interest than what I had been paying ie. "investment" debt would still be: $500,000 - $52,000 (from offset a/c) = $448,000.
Now to the question (thanks for getting this far):
Do I really need to keep that $52K in an offset a/c against my $500K loan to maintain full tax deductibility of that loan?
Put another way: The new lender gave me a bigger loan (for investment purposes) on the refinancing, then put $52K into an ordinary savings account - can that money be used to pay down my PPOR?
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