Trading up

[Pessimistic]

You have a house. You fancy a different one (trading up) and think (can I rent out the old one)

If you could, the renter will pay half the repayments, the taxman a quarter and you the other quarter.

Trouble is if you don't have much owing on your existing home - they regard all the loan taken to buy the new one as not for the purpose of an investment property therefore no tax relief on the interest.

I read that if you started with a $300,000 loan, but made your repayments into an offset account linked to that loan - you could just take the money out of your offset to buy your new house - and call the 300,000 an investment loan.

If however you had paid off the home loan, you couldnt re-mortgage and claim tax relief.

If you think you may trade up and rent out your 'old' house -best to keep the loan seperate form any lines of credit or anything like that.

Does any one think this is correct or otherwise ?

 

[lenny&carl]

I really really don't know the rules, but I'm guessing you could borrow x amount on the first house, use that money to extend/renovate it, be left with a bigger mortgage which could then be exploited for the neg gearing tax credits while bringing in more rent (until the new owings from the renovation are paid off), & then go get another house.

 

[Pessimistic]

I was thinking that lenny