HDT still confused!

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

 

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.

 

I see this question has already been answered elsewhere on the forum:

http://www.invested.com.au/forums/4/putting-ppor-into-hdt-good-idea-1234/