Formula to allocate part of a mortgage to a MHU

[belgarionsmate]

Hi All,

I have property in which I live in which has an existing mortgage of 300k.

I am planning to build a MHU on the same property which will be rented for income.

I understand that part of the existing mortgage can be alocated to the MHU.

What is/are the formulars for doing this?

Thanks in advance.

[belgarionsmate]

Anyone? (Sorry if this question is just too basic)

[drelly]

MHU = minor home unit?

I don't see how you can claim any interest on an existing mortgage for the new dwelling. Unless you are either borrowing money for it or are restructuring ownership of the existing property, there is no debt associated with the new one.

[One]

Are you wanting to extend the existing mortgage to cover the new unit? Why not just take out a new mortgage for it?

[belgarionsmate]

MHU = minor home unit?

I don't see how you can claim any interest on an existing mortgage for the new dwelling. Unless you are either borrowing money for it or are restructuring ownership of the existing property, there is no debt associated with the new one.

Yes a minor household unit

I was working on the basis that the MHU is now taking a portion of the land from the exiting site and should therefore be paying for it.Much the same as when you use a room in your house for business purposes you can allocate a portion of the overall household expenses to the business.

[drelly]

I was working on the basis that the MHU is now taking a portion of the land from the exiting site and should therefore be paying for it.

I see what you're getting at. Yes, I suppose you could do that. I used to have flatmates, so claimed on a pro-rata basis by the room. I had 3 rooms and let 2, so I claimed 2/3 of the interest on my mortgage.

[belgarionsmate]

So does anyone know an IRD acceptable formular(s) for doing this?

[blurt]

I live in the same circumstances. Mortgage interest deductibility is based on ratio of floor areas. The accountant was quite adamant that the IRD would frown upon the allocation of the deposit to the part of the property I live in (which would greatly increase the amount that was deductible). So the equity is also divided up based on floor area ratio.