Yasi finds himself ... Caught between houses

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Q We have paid off the mortgage of the house we live in. We bought a block of land in a neighbouring suburb and we’re building an investment property on it. The way things are shaping up, the investment property is going to be much better than the house we live in.

The problem is, if we move into this new house we would have to pay off this big new mortgage of $550,000, and we can’t claim that interest on tax.

To make matters worse, if we give up the house (we’re living in) for rent, we can’t do any negative gearing on that. So we are looking for a legitimate way of transferring the big mortgage on this investment property to our existing house so we can rent it out and benefit from negative gearing.

A Paying off the family home is quite a milestone in your financial life and an achievement to be proud of. And a move to the house you’re building is an exciting prospect.

But, unfortunately, there isn’t a simple way to transfer the mortgage to your current home and maintain the tax deductibility of the interest payments.

If moving into the house you are constructing is a long-term lifestyle decision, another option might be to simply sell your current home once construction is completed and use the proceeds to pay off your debt. This strategy may not have the same tax-deductibility benefits but you will have less debt to contend with and you can begin investing in other areas.

If you decide to sell your current home and are still intent on using tax-deductible debt, you could borrow against your new home to invest in shares. Or perhaps you could buy an investment property, although deciding on this option would bring with it a raft of costs, including stamp duty and legal fees.

Although selling your current home to pay off your debts may not be the most glamorous option, it might allow you to consolidate your wealth and let you focus on building your retirement savings through superannuation and other investments.

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