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MY-MJ | 27 Sep 2012, 06:37 PM Agree 0
Dear forum-members,

We (my wife and I) would be grateful to you, if anyone could provide a great solution to our scenario.

We are living in a suburb (22 km South-West of Melbourne CBD). We have paid off the mortgage of the house we are living in at present.

We bought a block of land in a neighbouring suburb, 1 year ago and now we are building an investment property on it. We're building it with Porter Davis. The way things are shaping up, the investment property is going to much better than the house we're living in at present.

The problem is - if we move in to this new house and start living in it, we would have to pay off this big new mortgage of $550K, and we can't claim that interest on tax.

And to make matters worse, if we give the house (we are living in at present) for rent, we can't do any negative gearing on that. And we have to declare extra income from this rental house.

So, we are looking for a legitimate way of transferring the big mortgage of this investment property ($550K) to our existing house (we've been living in for 7 years - of which, the mortgage is paid off); So, that we can give it out for rent and we can take the benefit of negative gearing. And at the same time, the new property becomes mortgagge-free.

Any suggestions / recommendations would be greatly appreciated.

Thank you in advance.
  • Lesley | 27 Sep 2012, 09:54 PM Agree 0
    Cant really do it but may be able to arrange partly. If current property is owned in joint names have 1 person buy out the other party so they own it 100% and then use the cash (from sale of 1/2 ) to put toward the new owner occupied property.
  • MY-MJ | 02 Oct 2012, 09:12 AM Agree 0
    Hi Lesley, Thank you for your reply. You have given a great idea. If we followed your idea, there would be stamp duty involved when I sell my 50% to my wife, is that correct?

  • Chandanie | 02 Oct 2012, 09:29 PM Agree 0
    But does this involve actual cash? Sorry for asking but I didn't follow it and am really interested as we also have a similar scenario.
  • PippaMeeki | 07 Oct 2012, 02:07 PM Agree 0
    You can refinance your pay off one depend on your income you may have at least 80% from your pay off one than transfer it to the new one. Then you old one will become an investment property rent it out if interest is higher than the rent you can claim it as negative grow and claim the lost from yours income also all expenses u spend on the investment one that u can claim it on the tax return. Hope my 5
    cents help :)
  • Sandy | 24 Oct 2012, 02:08 PM Agree 0
    Have you thought of selling your current house, using the proceeds to pay off the mortgage on the new home and then use the equity to invest elsewhere. It would also allow you to have your investment spread across different areas/states and not having all your eggs in one basket. Especially considering the melbourne market is predicted to have an average growth outlook over the next 3-5 years, it may be perfect timing to move into emerging markets.
  • Brando | 25 Oct 2012, 11:11 AM Agree 0
    this is the first problem facing new property investors, the trouble is homes have an emotional attachement and houses dont!

    According to the tax office you have to purchase investment products (as opposed to things you already own, and valuations could be disputed and challenged). Good self-managed super advisors will tell you to form a super “company” that can buy shares in “Unit trusts” (of which your securities [houses] can be part of) but they will all have to be new separate entities.
    The trouble is we don’t seek financial advice before purchasing in our own names (the normal thing to do since the Magna Carta... now there are imaginative trusts to purchase things in.)
    Purchasing your own house is not really good sense as you have to pay thousands in stamp duties and establishment cost.. my advice is to pay a professional for a structure to look after your finances, because how you are going, you could lose everything. We see it happen all the time.
  • Bronwyn | 30 Oct 2012, 11:57 AM Agree 0
    The lesson here for everyone is that you shouldn't pay off your loan. That might sound a bit radical but when you are paying off the principle you are reducing the banks risk and giving up control of your money because if you get into trouble and need that money the bank doesn't have to allow you to redraw if they assess that it will increase their risk. If you have an interest only loan and you pay the extra that you would have paid in principle into a 100% offset account it reduces the amount of interest you have to pay (the same as if you had paid down the loan) but you retain complete control of the money. Then if you move to another house some time down the track you can take all of the money in the offset with you and if you rent your old house out it still has the maximum loan and deductions. 100% Offsets give you the best of both worlds, you save on interest but you maintain control of your money.
  • brock | 14 Nov 2012, 08:56 PM Agree 0
    You know what I know someone who can help you with that. SMSF are experts when it comes to mortgages and retirement finances. I believe they can surely help you a lot.
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