We are thinking about purchasing a new home (growing family) and keeping our current home as an investment property.
Currently we have our savings in our mortgage re-draw which we plan on using for the deposit of our new home. Once we redraw to fund the purchase of our new home and convert our existing home to an investment property the existing loan we have will be back up to the max remaining owed, for which we'd plan on claiming a deduction on the investment property loan interest.
I have been told we might not be able to claim interest as tax deductable if we convert the property to an investment property and if we use the re-draw facility to purchase a new home as our primary residence, as the transactions on the loan would not be entirely for investment property purposes and we could only claim if we keep our deposit separate from the existing loan (i.e. in an offset). How does this work?
Is it possible to use the re-draw to take out our savings as a deposit, and refinance the existing loan (currently owner occupied) to an investment property loan and then claim the tax deduction on interest charges of the investment loan?
Basically I'm trying to understand if once we refinance our existing loan to an investment property loan does this 'restart the clock' on the loan, so all interest charges relating to the refinanced loan can be claimed as a tax deduction once our new home loan and investment property loan are entirely separate?
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