Utilising line of credit

Question from Dan updated on 1st March 2015:

Hi, I currently have three rental properties along with a fourth property I live in. All the properties are owned by a trust. I have a revolving credit facility which is linked to the house (mortgage wise) I'm living in, all rents get paid into this account too. The revolving credit facility has a limit of $49,000 of which $35,000 is personal money I have put into this account to offset mortgage payments for the house I'm living in. The rest ($20,000) is money owned by the trust account. I have also recently refinanced one of my rental property loans with a different bank and set up a revolving credit there also purely from the equity in that property alone. This has created $60,000 in money. If I have to spend money on a rental property (like for a hot water cylinder), can I use the money from the second revolving credit facility rather than the first one? I would like to keep my personal mortgage payments lower. From a tax perspective?

Our expert Mark Withers responded:

I see no particular issue with respect to use of the new line of credit. Care must be taken to ensure that overall the trust only deducts interest on borrowings that are drawn in relation to the generation of income from the investment properties. Any costs, including interest, related to your private and domestic living arrangement are non deductible.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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