zerocool2009
Honorary Master
This is exactly what I am doing, and it works like a charm! Once you hit "profits", regear and buy more. Its actually funny, after property #5, it just snowballs
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Paid up access bonds
- Thread starter Merlin
- Start date
This is exactly what I am doing, and it works like a charm! Once you hit "profits", regear and buy more. Its actually funny, after property #5, it just snowballs
He's playing a very dangerous game then since legally you can only offset the actual interest incurred on the bond against the rental income regardless of what the instalment is. He needs to hope SARS never take a closer look at what he's doing.
Cius
Honorary Master
Or I am remembering it completely wrong. This was a while back. Main point was I asked him why he did not close the bonds and he said it saved him tax by making those payments. So then if I understand you the capital portion of the payment does not count against the tax, just the interest portion? Sounds like a mission to calculate for tax purposes. Do the banks give you that number on a tax certificate then?
zerocool2009
Honorary Master
Just a note, the service fee is as per your signed contract for the bond.
It goes up yearly, but what you signed in for, is set in stone.
Its determine by the bond contract signed at the time.
Banks give you a full break down per year (to make your life easier).
And SARS really dont care. I bought a car cash using my rental bond (no issues, no questions)
deweyzeph
Honorary Master
I agree, this is something that SARS looks very closely at. Interest deductions are a touchy subject at the best of times with SARS. If they ever query your interest deduction against your rental income you'd better be able to explain very clearly how and why the interest is deductible.
muisnes
Senior Member
That is correct - capital repayments cannot be deducted from income as an expense for tax purposes. Only the interest.
Interest is calculated daily on the capital amount outstanding and levied as a charge on the mortgage account monthly. The monthly or quarterly statement your receive shows the interest levied on the account.
muisnes
Senior Member
Another reason to keep the mortgage active after paying off the capital amount is saving on bond registration fees when purchasing another property.
If you can finance the amount needed for a new property from the available funds in the access bond it is not necessary to register a new bond on the new property at the Deeds Office. This can be a substantial saving.
If you can finance the amount needed for a new property from the available funds in the access bond it is not necessary to register a new bond on the new property at the Deeds Office. This can be a substantial saving.
That's a completely different issue to claiming the full repayment rather than actual incurred interest as a tax deduction. What you did is a bit of a grey area in the tax laws, the other one is explicitly illegal.
zerocool2009
Honorary Master
Well, its interest at the end of the day. Every year I am being audited, and giving my data/information. Zero issues for 15 years so far
zerocool2009
Honorary Master
I know FNB have 4 or 5 versions of flexi’s. But the want all upgraded / ported to the latest version. As in rules differ which you can borrow against
W@P
Honorary Master
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No just joking, I also have a small one on a rental property.
I have used some of it to install my solar system at my place a few years ago. Also used some of it to buy a car iirc.
They can be good tools if managed correctly.
zerocool2009
Honorary Master
zerocool2009
Honorary Master
It's been quite useful. Used it many years ago to build a granny flat on the same property, and more recently for a solar installation at a different property. At prime - 1.35 it's by far the cheapest credit I have access to - pity it only has about 2 years left to run 
Depends. I know a couple of the banks will allow you to withdraw back up to the original loan amount for the first 5 years of the bond. It does automatically trigger an updated monthly repayment calc though.
The bond in question has less than two years left to run, and still allows me access to the full bond amount.
zerocool2009
Honorary Master
With who is that bond ? Lets say you have 6 months left, and withdraw the full amount. The bank can get a fine for reckless lending
deweyzeph
Honorary Master
How is that even possible? Just the monthly repayments alone would be insane if you rolled back to the full amount with only 2 years left.