Buy 2nd property to rent out - Extend current bond or take out 2nd bond

[AdrianH]

Hi

My question is one regarding tax deductable items on my rental income.

I am in the current position that I owe R2000 on my bond for the property that I live in. I want to buy another property that will be used purely for renting out. According to my bank, the choice I have is to either

Extend my current bond to the purchase price of the 2nd property, draw the funds out, buy the 2nd property "cash", and begin paying off original bond again.

or

Apply for 2nd bond and purchase the property with the 2nd bond.


I do understand the following is tax deductible with regards to paying tax on my rental income:
* bond interest
* rates and taxes
* levies
* maintenance
* insurance

What I would like to know these tax deductibles are valid for both choices I have? I think the issue I have is that if I opt for the first option of extending the bond and then buying the 2nd property "cash", how can I make the interest incurred on my original bond tax deductible as the bond is still linked to my live in property, not my rental property.

Any advise would be appreciated.

Kind Regards

 

[moklet]

For tax reasons you will have to take out a new bond on the new property

 

[supersunbird]

For tax reasons you will have to take out a new bond on the new property

Just makes it easier. For example home loan tax certificate from bank stating the interest for they year will have the correct address on it.

 

[AdrianH]

Thanks, your answers is what I thought I should do.

 

[supersunbird]

Thanks, your answers is what I thought I should do.

You could always rent out the current property and use the money from the bond to move into the new place.

The main difference cost saving would only be the Bond registration fee, if I understand correctly.

 

[noxibox]

I think the issue I have is that if I opt for the first option of extending the bond and then buying the 2nd property "cash", how can I make the interest incurred on my original bond tax deductible as the bond is still linked to my live in property, not my rental property.

Your documentation will prove what the money was used for. It isn't strictly necessary to take out a new loan. I submit documentation to SARS and they've never objected to the fact that the loan was originally taken out for another property. We did it this way because the old home loan has a much lower rate than the banks offer now.