Hi folks
im a newbie and have recently purchased my first house. i got it for a great price but only just scraped in having my 5% deposit.
I have read a bit about IO loans and the like and am very keen to invest and get quite a few properties with the same aim as most of you…to not have to work a 9-5 job.my question is….where do i go from here? Is IO a good place to start if i want to get my first IP? i have a clean slate and want to move forward in the right direction.
at the moment my aim is to build up some equity as quickly as possible to enable me to use it for investment purposes….so i am paying as much as i can off the mortgage while i have the “honeymoon rate” whilst doing some very basic reno’s…i am holding off on kitchen/bathroom reno’s for a year and then will reassess….your advice is appreciated.
glennSounds like a good plan. Paying it down as fast as possible, while adding value will give you equity quicker. You can then use this to purchase your next one and so on.
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
Hi Glenn & Welcome to the forum,
If you intend to increase the equity in your PPR by way of reducing the loan balance, then I would suggest you look at the benefits of a 100% offset account linked to your loan,Regarding the honeymoon rate,
I’m not to fond of these as the revert rate after the expiry of the honeymoon period is usually at a much higher rate, you may qualify for a discount rate for the term of the loan depending on the amount being financed, Cheers.Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
I am with Steve, “pay it down” through a offset account. This allows you a lot more flexibility.
I think you are on the right track.
Cheers,
Simon Macks
Finance Broker
[email protected]
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.
Me three. The boys know what they are talking about!!!
The Mortgage Adviserhttp://www.themortgageadviser.com.au
well folks you will be happy to know that i got a offset account set up when i got the loan. Im paying extra on the loan as well as putting all savings into this account.
Im thinking that maybe when i get an IP i may be able to draw from this offset as emergency funds for the IP…eg breaks downs, maintenance type things.
i have no ties etc so will have friends boarding with me to help reduce the loan quicker.
If i was looking at an IP for around the 300-350k mark how much equity would i need? is there anything else i need to do also? This would be for an IO loan….my house is currently worth around 350 and i owe about 320…
you are on the right track with the basic reno’s at this stage of the game.
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If your goal is to on sell this property there is an argument for leaving the kitchem and bathroom reno until the very end so that the new purchaser gets the full benefit.
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Don’t forget there are fixed rate products out there that let you redraw your additional repayments. This will let you keep control of your cashflow (repayments) as your portfolio expands.
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Good luck.
.It might be a good idea to talk to a financial adviser before you buy your first IP, as you may find that it’s better not to purchase it in your own name, but through another structure for tax effectiveness.
If you have an offset account, there’s no need to put down ‘extra’ on the loan as long as you leave the money in the account and don’t spend it. This works to your benefit financially as if you had reduced your loan, while also leaving you with the flexibility to withdraw it if you need to (which you can’t do with the excess loan repayments unless you have a withdraw facility on the loan). You may find that when it comes to purchasing your IP that the cash is more handy than having the extra equity in the house.
Congrats on the first house!
Originally posted by 65ens:Im paying extra on the loan as well as putting all savings into this account.
I strongly suggest not paying extra off the loan if you might convert it to an investment property in the future. Just pay interest only and leave the rest sitting in the offset. It does the same thing. Just don’t spend it on rubbish!!!
Im thinking that maybe when i get an IP i may be able to draw from this offset as emergency funds for the IP…eg breaks downs, maintenance type things.It would be better if you could secure a split loan on your PPOR to use for these expenses. Paying out of the offset means paying upfront and no interest expense. That assumes you are looking for more deductions.
i have no ties etc so will have friends boarding with me to help reduce the loan quicker.Good idea. Make them paint the place on weekends for food!!!
If i was looking at an IP for around the 300-350k mark how much equity would i need?To avoid mortgage insurance, you would need to have 20% left over (difference between all loan amounts and property valuew) AFTER you borrowed enough to purchase the investment property and pay all costs like stamp duty etc. You could get away with 10% but you would be paying a lot in mortgage insurance.
The Mortgage Adviserhttp://www.themortgageadviser.com.au
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