We have just renovated a place, we are in the process of deciding whether to stay here, or to sell it and buy a unit to rent out and buy a place to live in.
Just wondering if anyone can tell me in laymans terms how negative gearing works??
If we keep this place, we would have to borrow 100% for the place we live in. If we sell, we will have a fair bit of equity to put to either the investment or the place we live in. Not sure which would be better?
If you have an investment, it's best to have that mortgage your highest, and the one you live in the lowest mortgage. For tax purposes, you can claim back on things like the interest you pay on your investment property, expenses, real estate agent fees etc.
I'd reccomend speaking with an Accountant to see what your best to do.
Do you want to sell the place you are in? You may have enough equity to purchase a rental property anyway. Keep the equity in the house you live in, and borrow as heavily as you can against the investment. You may be able to rejig your existing loan structure to do so. Might be worth chatting with your bank mgr to see what sort of finance options are available.
See I dunno MD - if we stay here we will want to extend. I figure it's easier to just buy a bigger place! Too many options, I have the mobile lender coming next week for a chat but want a heads up if he starts talking complicated bank stoof.
ETA: Our mortgage is only around 1/3 of what the property is worth so plenty of equity.
My brother said its always best to borrow 100% on an investment property because you can claim all out of pocket expenses on your tax.
However, if something started as your residential property and then you move out and turned it into your investment property - you can't claim the interest you have to pay on your mortgage, something you can do if its 100% investment use only.
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Negative gearing for dummies....??
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