refinancing principle!

Hi can someone explain in basic english the refinancing principle with regard to HDT. I have read Trust Magic but i am still missing something.

Is it if i borrow for an asset eg property and i buy special income units in the trust, the trust buys property at X value and then 2 years time for example i get it revalued it has gone up to Y value can i then refinance the with a new loan and take out the equity for my own use. Or am i missing the point.

any ideas?

 

not quite.
If you take out a loan in your name to purchase SIU.
say that loan gets repaid over time.
Trust then takes a borrowing up to the original value of the units.
money used to repay your initial capital and hence the trust can now claim a tax deduction for the interest.
You end up claiming interest twice on the same property.

I do not think in practice many would implement this strategy as most would utilise the increased capital growth to buy IP no 2 etc

Cheers
Nickm

 

So it would be better to have that Loan as P&I in Trui's case?

As for using the CG achieved to purchase IP2, would the best course of action be to access the equity via a LOC and use this for the next IP's deposit and costs..then take another sperate Loan for IP2?

 

You could go P & I but i advocate that Int only is usually the best way to accumulate Investment assets.

Yes a LOC would then be utilised against the property