Question from Stephanie updated on 7th December 2017:
My partner and I are looking at buying our first property soon. We have been pre-approved for a 10% deposit as owner occupiers. We will be owner occupiers for the first eight months but are considering moving cities after this and renting the property out long term.
If we do rent the property out long term, are we still able to deduct mortgage interest payments from our rental income for tax purposes - even though we were initially lent the money as "owner occupiers" at less than 40% LVR? Or is there another way of getting around this?
Our expert Kris Pedersen responded:
Once you have changed the purpose and are renting the property out then you can claim the interest as a tax deduction. The 40% rule is a finance based rule so it doesn't have any effect on the tax status of the property.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz