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HDT still confused!

Discussion in 'Investing Strategies' started by Triu, 13th Sep, 2006.

  1. Triu

    Triu Well-Known Member

    Joined:
    1st Sep, 2006
    Posts:
    161
    Location:
    WA
    Can anyone please explain again how i can put my existing PPOR into a Trust then draw 80% equity out of it and then use that money as a deposit on a new PPOR! While keeping my existing PPOR as a IP! I currently have a debt of $200k on a property worth $500K but i have used some of this equity to buy a IP already with a line of Credit so now i am geared at 80% already! I might have to wait a year or 2 so i can refinance again and buy my new PPOR!

    Should i pay off my debt of $200k as quick as possible before i transfer it into the trust or should be patient and just wait for the capital growth then refinance.

    thanks again for your advice

    Triu
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    Hi

    You would have to sell the property to your trust. It is probably confusing if you think of it as transfering to your trust. To make it easier, just think of it as selling to another person instead.

    You sell you house to X (trust). Since it is a sale, the proceeds can be used as you please - it shouldn't matter if you pay the existing loan down beforehand or not as the loan will be discharged. And since X is borrowing to buy an investment, the interest on the full loan should be deductible.

    Some things to consider:
    Since this is your PPOR, and tax free, try to transfer it at a high price. There will be no CGT on your home, so you will not pay anymore tax, but the stamp duty will be incurred at the transfer price (or market value). Paying a few thousand extra in stamp duty, may save you much more in CGT later on. Then later if your trust were to ever sell the price, it would pay less CGT. You may have to justify your value, so maybe get a few valuations, and go with the highest.
     
  3. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney