To whom it may concen,
I recently bought a house to live in with my wife,
The house is worth around $365000, backthen and now should be more.I recently went to a consultant ‘Westpoint’ who organizes your finance structure in a way to reduce our homeloan quicker, which is non tax dedcutibale.
Basically the way they do this is to buy a property which is rather new like apartments and
have depreciation scheudule (tax savings) they also calculate how much we can afford per week to paying this new investment property e.g $100, so they would find this type of property that suites the buyer (us). Then my current home loan is changed to an equity style loan with all the same benefits as my offsett account. The idea behind this is to reduce our non deductible interest re-payment by having the investment property’s rent and tax savings going into my equity account which in turn reduces my interest repayment quicker. However keeping in mind that I still have to pay my investment property interest repayments (but deductible).Another words we are going into negative gearing
in order to reduce our non deductible house loan quicker in the short term!What are your thoughs on this strategy and whether this is a good way to reduce my home loan quicker???
Aprreciate your advice or comments.
Regards MikeUnless you prefer negative gearing for tax savings this would not be my choice of investing.
My strategy is to have cashflow arriving in my hands monthly (passive income) from the IPs. And spending less time at work thats including my partner.
Its sounds like your situation is rob peter to pay paul. And i can not see any benifit in this for wealth creation other than capital gain for the long term if that is your plan. Morgage brokers will disagree with me on this one.If you do a search through this forum on positive geared properties you will see the benifits.
If i were in your situation i would put everything into my PPOR.And start reading books on IP’s.
Dom
[biggrin]Mike – don’t pay these guys to do that for you!!!
A LOC is quite similar to your offset account – but costs more, so you don’t need to change it. It works the same as putting all your money into your offset account – saving interest etc.
As for buying a new apartment that costs you each week, you could easily do that yourself too!! If you wanted to go into investment property, I would work out what it is you want to achieve, and learn lots for yourself…
You ‘should’ be able to find a property that could well break even with tax benefits, so why would you want to pay any money.
Research first….
Cheers
MelWhat are they charging for this?
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 Mike,
An offset account structure keeps things a little cleaner for everyone. Lines of credit as promoted by Westpoint are for the more disciplined spenders /budgetters and provide few (if any advantages over an offset account).
As others have said stick with your current structure.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Hi All,
Thanks for all your valuable advice. Its my first time on this forum.
I guess my thoughts are to reduce my non-deductible interest repayment for my home as fast as I could, this way my loan reduces at a faster rate because it puts more into the loc account. Then after paying this loan off I would get into positive and capital gains ip.
Thanks again for all your valuable help.
Cheers MikeHI Mike,
Anb offset account can allow you to own your own home faster – the speed at which you achieve this is relative to the amount in your offset account and the size of the loan.
We deposit all of our income into an account offset against our home, pay everything by credit card, our various loan interest bills are paid electronically when they are due and we clear the credit card bill monthly to maximise the interest reduction to our home loan while ensuring we do not get stung with high credit card interest bills.
If you do want to start investing you may find you have sufficient equity in your current home at the moment to use for deposits and purchasing costs.
Create a line of credit for this (as distinct from a line of credit to pay the home loan faster) and then secure your investment properties with self supporting loans. It is a myth that you need to own your own home before you start to invest – the costs of waiting can be significant.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Put on the brakes, stop the horses, whoaaa doggie.
Ok stop and think, taking on more neg geared debt to save money on tax. How sily is this. The hole is big enough with your ppor needing some cash to pay it off first. Dont be suckered in by some hot to trot sales pitch about tax savings. We all know that the tax laws change almost weekly so taking on 25 – 30 years of debt based on todays tax benefit is ludicrous.
See that bucket of cold water over there, go stick your head in that for a sec, clear the head and take a deep breath. Ok, now we start by agreeing with several other posters that geting a positive cashflow property means CASH now to PAY OFF your ppor.
Doing it smart with an 80%LVR loan is also smart as you can then access any cap gains as soon as they arrive to do it again and again and again. Finding those elusive properties is so hard these days but they are there. I have some in Tassie for sale(yes im a spotter) that have an $80k price with a $120-30/week rent. Some say this isnt enough to generate cash but it sure beats a neg geared property and you still get that elusive tax break by doing a depreciation schedule. Rates are low and its in a demand area.
So my point is, they are out there if you do a bit more than accept the word of the man in front of you with a pen. Be careful, do some more research, get the property that suits you not just now but in 5 years time, and enjoy investing without having to find extra cash each week just to make ends meet.
Good Luck
DD
Don’t sweat the small stuff,and it’s all small stuff!!
Mike
You should be able to do this on your own if you wanted to. The company is probably charging you a few thousand to set it all up, and they may even be getting a hefty commission on the purchase of your new property.
Can you let us know the fees and the interest rates?
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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