Dividing question

By |
Q. My husband and I have a property in the Blue Mountains, NSW, worth $400,000, We owe $145,000 on it and have $81,000 available in redraw. We'd like to keep the property as an investment and buy a property in Sydney in which to live. We've considered refinancing the $145,000 with an interest-only loan, however, we have no other savings and would need to borrow 100% plus costs for the Sydney property. Does this make financial sense, or should we consider selling our existing home to buy the new one?
A. An accountant will be able to show how you can implement your plans most cost and tax effectively. If you have sufficient income, are very keen to hold onto the Blue Mountains property and, taken that this is currently held jointly on a 50:50 basis, one of you could sell one half share to the other (the higher income earner) for its value of $200,000 (estimated stamp duty $5,500). The $200,000 proceeds of sale of the half share can then be applied to repay $75,000 (half share of the mortgage) with the balance of $127,500 going towards the purchase of your new home in Sydney so that your non-deductible home loan borrowings are reduced by $127,500. The purchaser of the half share could borrow up to $320,000 or 80% of the total value of the property by way of an interest-only investment line of credit (some have a capitalising feature providing a buffer if cash flow is tight at any stage). The investment line of credit is utilised to meet the purchase of the half share plus acquisition costs (total, say $210,000), as well as providing an unutilised portion (up to $110,000) to meet any ongoing investment costs - rates, maintenance and other costs associated with the investment property. Depending on your incomes, this structure should reduce your ongoing costs.

After you talk to your accountant, speak to a reputable mortgage broker to see what options are available, and if you can afford both loans. You may find that you have to sell your existing property in order to buy the new one or, with rental income from the existing property, you can afford both. To find a reputable broker in your area, visit the Mortgage & Finance Association of Australia's website, www.mfaa.com.au

Related: Home Loan Calculator

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Top Suburbs : upper kedron , tweed heads south , new farm , windale , south brisbane

go back

Get help financing your investment

Do you need help finding the right loan for your investment?

When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local expert Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus, our mortgage broking service is at no cost to you.

How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here