Hi guys,
I posted last year on this question and received some advice, however we haven't done anything since then. We're now thinking about moving into a new PPOR again and looking at the same situation as last year (see post http://ift.tt/1MQ2lFe)
Basically we'll be turning our current PPOR into an IP and moving into a new PPOR. House is now worth around $480K with a loan of around $240K.
In order to maximise our 'deductible debt', I was told last year that my wife should sell me her half of the property. In essence we were told that I borrow $240K (half of current property value) to 'pay' her out. She then pays me back her half of the mortgage ($120K). This would leave us with a loan of $360K and $120K in the bank which we could then go and use as a deposit for another house. The total loan of $360K is then tax deductible.
What I'm trying to work out is why is this different to just 'topping' up the loan. For example, borrow up to 80% of the current value, meaning we could borrow up to around $380K. This would leave us with obviously a loan of $380K and $140K to use as a deposit for another house. I believe under this scenario however only the original loan of $240K is tax deductible.
So why is this different to me buying her out? Both scenarios result in similar loans ($360K vs $380K) and similar amounts of money to use for a new PPOR ($120K vs $140K). Why is it in the first scenario the full $360K is tax deductible but in the second scenario only $240K is tax deductible?
Cheers
I posted last year on this question and received some advice, however we haven't done anything since then. We're now thinking about moving into a new PPOR again and looking at the same situation as last year (see post http://ift.tt/1MQ2lFe)
Basically we'll be turning our current PPOR into an IP and moving into a new PPOR. House is now worth around $480K with a loan of around $240K.
In order to maximise our 'deductible debt', I was told last year that my wife should sell me her half of the property. In essence we were told that I borrow $240K (half of current property value) to 'pay' her out. She then pays me back her half of the mortgage ($120K). This would leave us with a loan of $360K and $120K in the bank which we could then go and use as a deposit for another house. The total loan of $360K is then tax deductible.
What I'm trying to work out is why is this different to just 'topping' up the loan. For example, borrow up to 80% of the current value, meaning we could borrow up to around $380K. This would leave us with obviously a loan of $380K and $140K to use as a deposit for another house. I believe under this scenario however only the original loan of $240K is tax deductible.
So why is this different to me buying her out? Both scenarios result in similar loans ($360K vs $380K) and similar amounts of money to use for a new PPOR ($120K vs $140K). Why is it in the first scenario the full $360K is tax deductible but in the second scenario only $240K is tax deductible?
Cheers
Selling half of property to wife
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