Smart moves when upgrading to your next home

Meet Ray. He is ready to upgrade into a new home, while turning his current property into an investment. Ray's current property is valued at $750,000, with a $250,000 loan. Over time, he has built up $250,000 in his offset account a smart move that is now paying off. Ray's buying a new home worth $1 million. He uses the funds in his offset account to cover the 20% deposit, plus stamp duty and costs. That means Ray now holds two loans: $250,000 on his original property, now converted to an investment loan. The interest on this is tax deductible. $800,000 on his new owner-occupied home. Because Ray kept his savings in an offset account rather than paying down his original loan, the existing $250,000 debt can be considered as investment-purpose. If instead he had paid off the old loan and then redrawn funds for the new purchase, that debt would be considered owner-occupied in purpose, meaning the interest would not be tax deductible. By planning ahead, Ray has set himself up with an investment property, a new home, and a more efficient loan structure. If you are looking to upgrade and want to make the most of your loan structure, we can guide you through tailored strategies to help you move forward with confidence.

Ray wants to buy a new home and convert his current property into an investment. He also wants to keep his cash savings intact for comfort and flexibility. To achieve this, Ray chooses to release equity against his current property. Here is his position: his home is valued at $750,000, with a $250,000 loan, giving him around $350,000 in useable equity. He applies for a $250,000 equity release, secured against his original property, to cover the 20% deposit for his new $1,000,000 home, plus stamp duty, solicitor fees, building and pest inspections, and moving costs. Now Ray holds three loans: $250,000 on his original property, converted to an investment loan, interest charges are tax deductible. $250,000 equity release, owner-occupied in purpose (since it funds his new home), linked to the original property. $800,000 on his new owner-occupied home, this will be linked to the new property. By keeping his cash in an offset account, Ray maintains a strong buffer and links his offset account his new $800,000 home to reduce interest charges. He is making repayments on a higher total loan balance, but he is only paying interest on $1,050,000, and he can clear the equity loan at any time using the offset funds. This strategy lets Ray move into his new home, create an investment property, keep his cash for security, and maintain flexibility in repayments. If you are upgrading and want to explore how equity release can help you keep your cash while moving forward, we can guide you with tailored solutions.

Ray's looking for a strategy to upgrade his current home while keeping his current property as an investment. Ray is considering converting his existing $250,000 loan on the original property to interest-only and extending the loan term back to 30 years to boost cash flow. Here is his position: Existing property value $750,000, current loan of $250,000 is converted to interest-only, as an investment loan. New home value $1,000,000 with a new owner-occupied loan of $800,000. By making the original $250,000 loan interest-only and extending the term back to 30 years, Ray reduces his monthly repayments on the investment loan. This increases his cash flow, giving him more flexibility to manage the new home purchase and cover other expenses. The beauty of this strategy is that Ray is maximising negative gearing benefits, the interest on his investment loan is tax-deductible while keeping the repayments manageable. He still maintains full flexibility: if he wants to pay down the loan faster, he can do so anytime. This approach allows Ray to comfortably manage his finances, upgrade into his new home, and optimise his investment property returns without compromising on cash flow. If you want to explore strategies like converting your existing loans to interest-only and extending terms to improve cash flow, we can guide you with tailored solutions that fit your goals.

Ray wants to purchase a new owner occupied property and sell his current property within six months of purchasing the new property to avoid capital gains tax. He also wants to keep $100,000 cash as a buffer for peace of mind and flexibility. Here is his situation: Existing property value $750,000, current loan of $250,000 and $250,000 cash in an offset account. New home value $1,000,000 with a new owner-occupied loan of $800,000. To fund the new purchase, maintain his cash buffer and access the lowest interest rate for his residual loan, Ray uses cross-collateralisation. He increases the borrowing on his existing property from $250,000 to $350,000, unlocking $100,000 additional funds. The $350,000 loan and $800,000 loans are cross-linked to both the existing property and the new home, covering costs, preserving his $100,000 cash buffer, and giving him better tiered pricing due to a lower combined loan-to-value ratio. Once he sells his original property within six months, Ray will need to clear out the $350,000 loan using proceeds from the sale. Ray can reduce the $800,000 new home loan if desired from proceeds of sale or keep all the surplus funds in his offset account to further reduce interest on his new loan. This strategy allows Ray to upgrade quickly, maintain a cash buffer, fund the purchase efficiently with cross-collateralisation, better tiered pricing due to the low Loan to value ratio and manage his tax position effectively with the main residence exemption. If you want to upgrade while keeping cash for comfort, we can guide you through strategies like cross-collateralisation and timing to make it work.

Ray is exploring another strategy: converting his previous home to an investment property for up to six years while moving into a new home. This is known as the 6-year main residence CGT rule, which allows Ray to treat his previous property as his main residence for capital gains purposes during that period. Here is Ray's situation: Existing property value $750,000, current loan of $250,000 and $250,000 cash in an offset account. New home value $1,000,000 with a new owner-occupied loan of $800,000. Desired cash buffer: $100,000. To make this work, Ray takes two steps: He uses the $250,000 in his offset account to cover the 20% deposit for his new home, plus stamp duty and other purchase costs. This allows him to fund the new purchase using his existing savings He pulls out $100,000 as a separate loan, linked to his previous property, to maintain a cash buffer. Keeping this loan separate ensures clarity for tax purposes and that the interest on his original $250,000 investment loan remains fully deductible. He also extends the existing $250,000 loan back to a 30-year term and switches it to interest-only, reducing monthly repayments while keeping it tax-deductible. Now Ray can move into his new home comfortably, hold his previous property as an investment under the 6-year CGT rule, maintain a cash buffer for flexibility, and manage repayments. When he eventually sells the previous property, he can benefit from potential capital gains tax exemptions and use proceeds to reduce debt or further boost his offset savings. If you want to hold your property as an investment while upgrading and maintain cash flow, we can guide you through tailored strategies like the 6-year CGT rule, offset account use, and separate investment loans.