Hi, I’m a virgin investor, mathematically challenged (blonde)! I own an investment property outright. I paid 90k and market value is currently 130k. Rented out at $100 per week. I’ve found a place in another state for 80k which would rent for about$85 per week. I also have 40k cash and a regular income so I would not have to contribute to the purchase. Should I use any of my cash to finance the new property or borrow all on the equity in owned house??? My head is swimming with figures and doubts!! I might add that I fully intend to go on investing in property so I don’t want to back myself into a corner.
Any thoughts would be gratefully accepted
AnneIf it was me then I would borrow 100% of the purchase price and also purchase costs.
If there was no other suitable place for the $40K I would consider an offset account but would not put the money into redraw.
Regards,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Anne,
Agree wholehartedly with MortgageHunter. That still allows you access to your funds if you need them for an emergency or indeed another IP purchase (if an opportunity presents itself)
James
Thanks both for the info. Forgive my ignorance but I cant see the reasoning to borrowing the whole amount ( returns from both properties may not cover all costs monthly) when I could borrow less, with my own deposit and feel comfortable about monthly costs. I’m pretty naive when it comes to numbers, % etc etc.My lender is telling me much the same as you two but I still cant grasp WHY!!!!
Please enlighten me a little further[?]Thanks guys
I am assuming you are paying PAYG tax through your employer.
The ‘loss’ on your IP allows you to claim a reduction in your assesable income. Through your accountant or yourself individually you can vary the income tax that you pay per pay period through a claim with the ATO.
Instead of claiming it back at the end of the year, the reduction in tax per pay period will cover (depending on your current salary) most of the additional payments you would require to cover.
James
Anne, if you own the first outright, and earn $100pw, and borrow all for the second, and earn $85pw, your total rent is $185pw.
I doubt your interest costs on the new purchase of (approx) $85K would be $185pw. So you would be in front, and would still have your $40K for further investing, and also ‘sleep money’ to cover you if anything drastic happens.
Cheers
MelHi James & Mel….thanks so much for your info, it’s much the same as I’ve read and been advised so I’ll go with it! Just wanted to make sure that I was on the right track!
Many thanks, will keep in touchOriginally posted by MortgageHunter:If it was me then I would borrow 100% of the purchase price and also purchase costs.
If there was no other suitable place for the $40K I would consider an offset account but would not put the money into redraw.
Regards,Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Simon,
What’re the different between the offset account & Reward Accoumt, I think they are same?Regards
Julian [
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