Investment Loan Refinance advice

Lnaveeng on 04/04/2024 - 16:25

Hi Fellow OzBargain members
This is my first ever topic here. So, seeking a bit of kindness

As a back ground, my investment property was in fixed interest till May and now scrambling to find better options.

My mortgage broker says he can get me ~100k cash out as a "renovation Loan" which I intend to put in my owner occupied loan. The catch is I will be paying .1% extra in interest rates as I will be moving from <70LVR to <80 LVR.

I am obviously not after financial advice, but just want to know if the extra .1 interest rate would be worth it or it doesn't make sense borrowing at a higher rate and offsetting a lower interest rate account?

Poll Options expired

  • 11
    No, I wouldn't pay the extra .1%
  • 1
    Yes, the extra .1% will be worth on June 30
Financial Loan

Comments

  • rambutann on 04/04/2024 - 16:33
    +3

    Sorry, are you wanting to take out 100k in cash to use for a renovation or to just put the 100k on your owner occupied loan?
    The latter makes no sense.

    • naveeng on 04/04/2024 - 16:50
      -1

      Put in owner occupied

  • jjjaar on 04/04/2024 - 16:40
    +5

    If you’re taking money from your investment loan to use for something other than your investment you will need to look into any tax implications around doing this.

    “Any funds withdrawn from an investment loan redraw facility for personal use can ‘contaminate’ the loan. This means the ATO can deny interest deductions or impose limitations on the interest deduction claims for the life of the loan.”

    https://www.adviseable.com.au/why-clever-property-investors-….

    • trapper on 04/04/2024 - 17:15
      +1

      Well extra 100k loan is 100% non tax-deductible, that's the implications.

      • jjjaar on 04/04/2024 - 19:45

        But if this was 100k that was previously on the investment then 100k from the beginning of that mortgage may not be tax deductible, meaning that any deductions on that 100k that have already happened to date may need to be repaid. Calculating that will be messy and may not be worth any benefits of doing this.

        • trapper on 05/04/2024 - 07:27
          +2

          No, only that additional $100k would not be tax-deductible. Consider it as a separate $100k mortgage distinct from the main investment mortgage. Although you can combine them, you must track them separately.

          I agree though that in OP's situation, there would be no benefit at all from doing this.

  • naveeng on 04/04/2024 - 16:44

    My original idea was just to pay off my owner occupied. So my question is if it would make sense to borrow at a higher rate to tap on the tax time deductions

    • SmiTTy on 04/04/2024 - 23:57
      +1

      It makes zero sense. And you can't tap on the tax time anything for the 100k

      It's like taking out a credit card (with high interest) just to pay your mortgage. Pointless.

  • Duckie2hh on 04/04/2024 - 16:44
    +4

    100k cash out as a "renovation Loan" which I intend to put in my owner occupied loan

    pretty sure this is therefore considered as not tax deductible.

  • Dollar General on 04/04/2024 - 16:53
    +5

    You cannot claim in your tax return the $100K you withdraw and put into your PPOR unless the broker is suggesting you commit tax fraud.

    Better off borrowing against your PPOR for the extra $100K if the rate is lower

    • naveeng on 04/04/2024 - 17:03

      Hmmm.Ok. Thanks

  • trapper on 04/04/2024 - 17:18
    +2

    It doesn't sound worth it at all. Unless you're planning on doing something illegal regarding tax.

  • Tee Rex Arms on 04/04/2024 - 17:41
    -1

    This doesn’t sound dodgy at all

  • soan papdi on 04/04/2024 - 18:51
    +2

    $100K at 0.1% is just $100. All this trouble and doubt for such a small amount at tax time, not worth it at all even if it’s legal.

  • mortgagebroker on 04/04/2024 - 20:59

    There is no benefit.

    Also, talk to your accountant and get their advice on this.

  • JIMB0 on 05/04/2024 - 05:08

    It will work if the 100k comes from an offset account.

  • tomclancy on 05/04/2024 - 09:01
    +1

    You need a better mortgage broker. Whilst your current one may not have provided 'financial advice' it certainly sounds as though they've given you a bum steer regarding the tax deductibility of interest on the extra $100k. Of course it's not tax deductible.

    FYI - check out this spreadsheet that a generous OzBargainer updates regularly —> CSV of Every Home Loan Mortgage Rate + Cashback in Australia.

    Also, uBank have an undisclosed promo at the moment of 0.10% off all investment loans (you have to ask for it when applying) which makes the uBank basic investment loan 6.29% at 80% LVR. If the lender you're refinancing too isn't better than this then just go straight to uBank directly.

Login or Join to leave a comment
Login Join