Not Sure Whether to Live or Rent in The New Property?

LPras1 on 14/04/2018 - 20:00
Last edited 14/04/2018 - 20:12 by 1 other user

I'm buying my 2nd property, 28 y o 4 Br house settlement in 2 months time. Currently living in own 3 BR unit townhouse close to public transport, ongoing mortgage with a Big 4 bank. Not sure whether to live in new one or stay in the current one. From bank, finance has been approved and deposit is in. Bank is offering 3.75% for both property and has said it doesn't matter to them where we live and rent. They may be able to change the interest rates around once we decide what to do.
Is 3.75% interest rate on variable sound reasonable or should i keep shopping around?

We are in a position where we can payoff the current home which is much cheaper than the new one we are buying but have left the loan as is for now due to uncertainty. Should i pay off the current home? and continue living here or move to new one and not pay it off for now? Or just leave both loans open and live in new one?

Had a chat to broker who suggested renting the new home would be more beneficial from tax point of view. Not sure how this works.

Any suggestions will be appreciated. Thanks

Home & Garden

Comments

  • Quantumcat on 14/04/2018 - 20:11

    You don't get any benefit to paying a mortgage on a house you live in so paying off the one you live in and keeping the leased one on a mortgage would be better. As for which one to live in, wherever you prefer to live, I guess!

    • dcep on 14/04/2018 - 20:16

      WUT ?

    • Donaldhump on 14/04/2018 - 20:18
      +1

      No benefit paying any of them off, just offset the one you live in, and keep the option to move that money around if you ever change residence. Once money is paid off it can't be claimed as a tax deduction when redrawn/refinanced

      • Quantumcat on 14/04/2018 - 20:19

        If you live in the home you can't claim it as a tax deduction anyway?

        • Donaldhump on 14/04/2018 - 20:42
          -1

          What….. you are telling me you can't negative gear your Ppor. Of course you can't

          If you live in prop a and you pay off a 100 bucks, and then move to property b, you can't move that money with you. Even from a redraw account Instead you would now pay interest on that money which can't be tax deductable.

          There is no advantage what so over to pay off extra, just offset it, and move as necessary, or required to get future loans.

        • Quantumcat on 14/04/2018 - 21:13
          +1

          @unclesnake: I don't understand what you're arguing. You seem to agree with me (except to have an offset rather than pay it off so the money is easily accessible for emergencies, which is fair enough)

        • Donaldhump on 14/04/2018 - 21:36

          @Quantumcat:

          Paying off != putting in offset

          Money in offset can be moved around without tax implications
          Money paid off when redrawn loses tax deductibility when moved

          So I am not agreeing

          You are saying to pay off

          I am saying to never pay off and instead offset

          In an awesome world every property would be interest only with an offset, and never pay off any principal.banks won't allow that though. Then after 30 years when loan expires pay them off.

        • Pras1 on 14/04/2018 - 22:19

          @unclesnake: If i redraw from house a which is almost paid off to pay off house b then live in house B that amount can t be tax deductible? Is that correct?

          What would be best if I wanted to move to House B?

        • serpserpserp on 14/04/2018 - 22:19

          @unclesnake:

          Can you blame them on your last point? You lend someone money to by an asset that you hold security over that has the potential to lose over 99% of its value. In 30 years the borrower could just walk away file for bankruptcy and you are left holding ya dck in ya hand ;)

        • Donaldhump on 14/04/2018 - 22:26
          +1

          [@Pras1](/comment/5846831/

          No you can't claim this as a tax deduction.

          you cant redraw money from mortgage a to offset mortgage b, then rent out property a and claim it as a tax deduction. This is why paying off or using a redraw facility is no good. Offset account defeats this.

          But see an accountant, even though I'm 100 percent certain, I may be wrong.

        • Donaldhump on 14/04/2018 - 22:26

          @serpserpserp: no I don't blame them at all. It's business

        • Donaldhump on 14/04/2018 - 22:29

          @Pras1: your only solution here is to live in a, or sell a to release funds,

          Alternatively live in b for one year to get stamp duty exemption, and to give the option to apply cgt exemption to either property. After one year then move back to a.

        • dcep on 14/04/2018 - 22:45
          -1

          @Pras1:

          transfer to spouse

        • Donaldhump on 14/04/2018 - 23:02

          @phunkydude: pointless if she on both mortgages

          If not on new mortgage, why not just buy new place in their name

          Can xterm to a trust fund, but gets difficult.

        • dcep on 14/04/2018 - 23:07

          @unclesnake:

          what do you mean ?

          buy prop b ppor on spouse name , still won't solve prop a to rent

        • EightImmortals on 15/04/2018 - 07:28
          -1

          @unclesnake: Money paid off a house become equity that can be leveraged for further investment loans. Yes, 'redraw' is a bad idea unless needed for a real emergency.

        • Donaldhump on 15/04/2018 - 07:57

          @EightImmortals: only do this last minute. But still if ur gunna move to prop b, instead of using 100k of equity of what u paid off, just use it as the deposit. Is the exact same thing

  • idonotknowwhy on 14/04/2018 - 21:55
    +3

    Just bought a house and had the water connected and am really excited about my first trip to the toilet.
    Not Sure Whether Take A Shit Or Just Piss in The New Toilet?

    • serpserpserp on 14/04/2018 - 22:20
      +5

      Mate you aren't doing it right. You need to start a new account to post that as a thread.

    • Donaldhump on 14/04/2018 - 22:27

      Always crown a new place with a dump.

      • [Deactivated] on 15/04/2018 - 01:23

        DUMPS

  • EightImmortals on 15/04/2018 - 07:26
    +2

    If it were me, I'd pay off the home I living in, that way you now own it, rent and interest free. Then rent out the new home as you have a heap of deductibles you can claim as an investment property. Or pay off the new one and rent out the old one, same deal I guess though I suspect you might have higher deductibles from the new one? The main point is that NO DEBT should be any smart investors eventual goal.

    • cauilfield on 15/04/2018 - 08:27

      how many IPs do you own? ta

      • EightImmortals on 17/04/2018 - 14:36

        None ATM but we used to have 3.

        • cauilfield on 17/04/2018 - 15:47

          why did you sell?

  • JIMB0 on 15/04/2018 - 08:23

    Why did you buy the new place???

  • cauilfield on 15/04/2018 - 08:27

    Don't pay them off, but please please please ensure you don't have a common offset account against them both, ensure to have two offsets!!!!!!!!!!!!!!!!!!

  • ziaxk87 on 15/04/2018 - 14:51

    whichever you rent out, you will be in position to claim deductions as it will be investment property. I would rent the new one as max loan is against this property. if you do decide that you are going to rent the old property I would refinance the loans so max loan is against that old property.

  • HeWhoKnows on 15/04/2018 - 21:02

    Depends on your priorities.
    If its minimising tax and maximising affordability then rent out the new property and claim interest and expenses as a tax deduction.
    With your current home you cant claim the loan interest payments if you rent it out.

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