How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Chris The Lawyer Your Own Question
Chris The Lawyer
Chris The Lawyer, Lawyer
Category: New Zealand Law
Satisfied Customers: 22320
Experience:  37 years qualified as a lawyer; LLB, MMgt and FAMINZ.
32702153
Type Your New Zealand Law Question Here...
Chris The Lawyer is online now
A new question is answered every 9 seconds

The equity on the house owned and the current family income

Customer Question

The equity on the house owned and the current family income has opened a way for a family to purchase a second house through refinancing their existing mortgage. The security for the loan from the bank would be over both houses with the bank not earmarking the new loan balance to either house. The existing loan was 100 K and the new loan balance will be 600 K after the purchase of the second house. The family has decided to rent one house and live in the other. The purchase of a second house and the resultant increase in the loan balance was with the intention of renting one of them. The market values for both houses are very similar.
Can the family move into the house of their choice and consider the increase in loan as relating to the house to be rented for tax purposes? This question relates to interest expense charges.
Submitted: 5 months ago.
Category: New Zealand Law
Expert:  Chris The Lawyer replied 5 months ago.
If you are renting the second property to tenants, then the costs of the transaction, and the interest and other costs are tax deductible against the rental income. The costs of the family home are of course not deductible. You would need to calculate the interest cost of the rental house, and likely the best way is to look at what you paid for the property and the increased mortgage. That amount and the interest cost is the figure which you would use.

Related New Zealand Law Questions