Hi,
My wife and I need to arrange a mortgage for our first property. We plan to love in the property for the 1st 6 months (to qualify for the stamp duty exemption etc) then either sell on, or rent for a time (with the ultimate aim to sell quite quickly so we can buy a larger property).
There appear to be some excellent mortgages available from Newcastle Permanent (both variable and fixed) – my Q is, should we go variable or fix? If our plan is to sell within 12-18 months, are rates likely to go up in this time…if not then a good variable rate would probably suit us. If they are expected to rise, then fixing is best. However, some fixed rates are nearly as competetive as the variables, so for the peace of mind I’m thinking fix for 3 years.
I also dont know whether its best to get an interest only or int + capital…the mortgage will be quite large (465k)..but not sure what the negatives will be if I go for a int. only? I read somewhere here that an IO with offset is a grat option.
Anyway, I could go on, I guess my point is I’m not sure which way to go!
Thanks for any advice.
It is hard to provide advice without more information on your situation. I would normally recommend IO unless this property is going to be your only ever purchase.
I would also steer away from fixed for such a short term project as this but would counsel you not to expect too much capital growth in the Newcastle market in this time frame.
Be careful of the hidden costs with the Perm products. Please compare some other lenders before making a decision.
If you are based in Newcastle maybe we can catch up for a coffee?
Cheers,
Simon
PS
I was quite touched by your comment:
“We plan to love in the property for the 1st 6 months”
[blush2][blush2][blush2]
Simon Macks
Residential and Commercial 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.
Hi…thanks for the reply…”love” and “live” – I use them interchangeably!
We are actually in sydney..so I guess the outlook is even worse than Newcastle..? It wont be our last purchase, I am hoping to sell the unit after e.g. 12 months, take the hit of a loss and lay off the market for a while and see where it is going – I’m not concerned with the potential (capital) loss, as I believe the property will drop further in value, so I’m getting out before things get any worse. I dont see any hidden charges with the Perm products, apart from a break fee…but they get excellent cannex reviews (13 products with 5 stars).
i guess if we plan to sell so quickly, then IO is probably best, maybe even a variable..I just dont know!
That is what I meant about the Perm…if you are selling in a shorter timeframe then you would be much better off without the deferred establishment fee (break fee).
Cheers,
Simon Macks
Residential and Commercial 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.
Hi Andy,
I’m really confused about your strategy.
Originally posted by andymitchell:with the ultimate aim to sell quite quickly so we can buy a larger property…
If our plan is to sell within 12-18 months
Why would you try to buy and sell so quickly fully expecting to realise a loss at the end of it? Why not just rent? There’s no rush to use your FHOG or stamp duty exemption.
Confused,
Munjy
Munjy.
We bought the unit off the plan at the height of the boom, its now dropping in value – to be honest I want a clean break from it, I can see it being a burden in the future if it drops in value any more. We are hoping to start a family, and as such need a bigger place. We may consider renting it out I suppose, and do all the -ve gearing thing, we will be a little better off that way (per month). But like I say, its caused me enough hassle and I just want rid, I’m not bothered about the loss right now. Its not really a strategy, we bought at the wrong time and I dont want it to have a long term impact on our finances etc, when we are just starting out.
Also, with the stamp duty exemption, we have to use it on this purchase, as it our first home??
I’m going to see a broker this week, but the last one i went to (Aussie) was pretty useless, very young, spotty and didnt give any decent advice.
Andy,
I totally get it now. And I’m with you on everything. As for loan structure, I’m sure TMA would say IO with offset. Gives the most flexibility. As for interest rates, if you sell this home within a yr, I don’t think it’d be worth fixing.
As it’s a new unit, you’d probably get good depreciation initially – have you looked at that? It may not be so bad.
Munjy
Hi Munjy,
You mention depreciation…I understand capital loss, but where would depreciation come into it for a PPOR – I thought that was only for investment properties (or is that the angle you are looking from)?
Cheers,
Munjy is spot on about what I would say… Interest Only with Offset ALL THE WAY!!!
There is another option….
Sell the property now before the expected additional losses are incurred. You can on-sell a property before settlement. From what I have read, you would take much less of a whack.
Regarding the FHOG and stamp duty concessions, no-one knows how long they will be around but under current rules, you will not lose your eligibility to buy a PPOR later.
TMA
http://www.email4money.info
Investor Links
First Home Buyer WebsiteHi there,
You may be right with the onsell idea, although we will have to pay stamp duty on the purchase if we sell before settlement, we will not receive the stamp duty exemption, and we will have to pay stamp duty on the next purchase, so its a bit of a hit aswell, probably about the same according to our recent valuation (this is my understanding from talking to the fhog people – we would keep our FHOG entitlement, but lose the stamp duty exemption, as we have had an “interest” in a property). Do you know of anything different?
Unfortunately, it looks like the OSR website is down at the moment. I do not want to answer on stamp duty concessions until I check it out more. I guess your decision will come down to how much you expect to lose with a property decreasing in value compared to selling pre-settlement and buying something else.
TMA
http://www.email4money.info
Investor Links
First Home Buyer WebsiteAndy,
Yeah, depreciation while your renting it out. Say, the first 6months before you move in. I’m sure that the most depreciation is in the first few years of a new place. Every little bit will help in your situation I suppose.
Munjy
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