Sorting interest costs
Question from Brett updated on 5th May 2014:
If we borrowed money from our personal house funds to finance a rental property, can we then alter the loan amounts to reflect this? So if we paid $50,000 as a deposit to purchase from our personal house floating account (thereby increasing our personal account interest payments). Can I transfer this $50,000 onto the rental account mortgages to reflect the true interest we are paying on this property?
Our expert Kris Pedersen responded:
Hi Brett, yes you can. Get tax advice to ensure you are doing everything correctly and in the best way to benefit your overall situation however the purpose of the funds determines whether you can get the tax benefits or not and obviously using the funds to purchase a rental property is something which can be written off. Note that if you are purchasing the rental into a look through company (LTC) you may find it beneficial to then get the above $50,000 borrowings also put into the name of the LTC. Note that as a guarantee will be required to this there will be a small nominal cost as you will need to involve your solicitor. Also I strongly recommend that you look to fund 80% of the investment property with a secondary lender so as to not cross secure the rental property into your own home. Regards, Kris Pedersen
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz