Transfer bond to another house

[Dolby]

Using fictitious figures :

I have two properties - one I live in and one I rent out, both worth R1m.

On the one I live in, I owe R1m - the rental is bond free. This means I cannot deduct anything from my rental and get whacked with tax.

Can I open a R1m bond on the rental property and use those funds to pay the house I'm living in? In other words a pure reversal - and the plus would be having a bond on the rental means I can deduct finance costs etc

 

[Blue Shirt]

I am sure you can do that, go talk to your bank.

You would be hit with new bond registration fees and bond cancellation fees on the old bond, though.

 

[ToxicBunny]

Using fictitious figures :

I have two properties - one I live in and one I rent out, both worth R1m.

On the one I live in, I owe R1m - the rental is bond free. This means I cannot deduct anything from my rental and get whacked with tax.

Can I open a R1m bond on the rental property and use those funds to pay the house I'm living in? In other words a pure reversal - and the plus would be having a bond on the rental means I can deduct finance costs etc

You can quite happily open a R1m bond on the paid off house, and then settle the existing bond..

But you will be in for costs over and above the bond itself, for lawyers and such.

 

[herbertk]

If the second property is paid for then you can do with the money what you want... as far as I know.

 

[jones123]

afaik
if its an access bond you can just transfer the money out to the other account.
when you do your taxes you can say you self financed the new house from the existing bond and claim the tax
i recall doing that a few years ago . dont know if its still possible
best you ask you tax consultant

 

[Not_original]

Im planning something similar . Will let you know when i pulled it off

 

[Nerfherder]

Using fictitious figures :

I have two properties - one I live in and one I rent out, both worth R1m.

On the one I live in, I owe R1m - the rental is bond free. This means I cannot deduct anything from my rental and get whacked with tax.

Can I open a R1m bond on the rental property and use those funds to pay the house I'm living in? In other words a pure reversal - and the plus would be having a bond on the rental means I can deduct finance costs etc

Are the interest rates the same ? factor that in as well.

Probably the easiest to just transfer the money though.

 

[russellO]

I'm pretty sure this type of thing isn't allowed. It's like using 1 credit card to pay off the other credit card. You not actually paying any money back that way but transferring debt the whole time.

 

[Nerfherder]

I'm pretty sure this type of thing isn't allowed. It's like using 1 credit card to pay off the other credit card. You not actually paying any money back that way but transferring debt the whole time.

No its not. The one is a paid of asset, an income generating asset.

 

[ToxicBunny]

I'm pretty sure this type of thing isn't allowed. It's like using 1 credit card to pay off the other credit card. You not actually paying any money back that way but transferring debt the whole time.

Not in the slightest bit like this...

This is refinancing an existing wholly owned asset, to pay off an already existing financed asset, in the hopes of being able to shift a tax burden.

 

[mikef]

Using fictitious figures :

I have two properties - one I live in and one I rent out, both worth R1m.

On the one I live in, I owe R1m - the rental is bond free. This means I cannot deduct anything from my rental and get whacked with tax.

Can I open a R1m bond on the rental property and use those funds to pay the house I'm living in? In other words a pure reversal - and the plus would be having a bond on the rental means I can deduct finance costs etc

In theory you do have a problem with this logic - interest incurred on loan is only allowed to be deducted from rental income when the purpose of the loan was to generate the rental income (i.e. buy the rental producing asset). Even if you do now take out a new bond on your rental property and use this loan to settle your existing bond on your residential property this interest is not deductible against the rental income as the new bond would not be seen as being incurred to generate rental income as the intention would be to pay off your personal bond.

To be safe I would advise you consult a tax planner to structure a way to achieve the objective you want - this would most likely involve the transfer of the rental property to a new legal entity.

 

[Colin62]

Just move into the other house. It'll be cheaper than trying to register a new bond.

 

[mikef]

Just move into the other house. It'll be cheaper than trying to register a new bond.

- The simplest solution to your problem.

The actual property over which the bond is registered is not important in determining the deductibility of the interest - the reason why the funds were borrowed is.