I bought my first Home.

Hi Peter,

This is not a suggestion for making the unit cashflow positive, but is important nontheless. Make sure the loan you get is interest only and that you have a 100% offset account attached, as you intend to make the property an IP in future it is important that you don’t tie up excess equity in the property.

Regards
Alistair

Hi. Good on ya! Just thought I should clarify a point mentioned in another reply as far as Interest only loans/payments go …….there is no problem getting an IO loan for owner occupied property, so the refinance issue would not arise. Andas Aperry mentioned make sure you link it to an offset or all in one account until you move out, so you can save as much on interest as possible. [specool]

hi there again,

My understanding on this subject may be flawed but this is my best attempt to explain it.

100%offset means that a bank account is buddied-up with your loan and your minimum loan repayments are deducted from it, but your entire offset-account balance is deducted from your loan amount in the daily interest calculations .

So let’s say on a 7.5% interest only loan of $160000, your monthly re-payment is $1000. Now let’s say you get your wage and throw $2500 into your offset account just prior to repayment. Next day $1000 has been deducted from the account to pay interest on the loan, leaving $1500 in the offset account. The daily interest owing on your loan is calculated something like this:
amount owing / annual interest rate / days in the year. On the offset account in the example above, the daily interest would be calculated with the amount owing being $1500 less (the $1000 repayment was just for the interest). So the greater the daily balance in the offset acount, the less interest accumulates each day, and your periodic repayments are reduced accordingly.

Interest payments on a loan for a principle place of residence (PPOR) are non-tax-deductible, and need to therefore be minimised, while interest payments on investment loans are tax-deductible and not such a bad thing.

The money in your offset account saves you on this non-deductible expense while it is your PPOR, but when it becomes an investment property you can simply withdraw that money and use it for deposits on other investments, or put it into an offset account attached to your next PPOR loan.

Any flaws in this explanation, please let me know, as my wife and i intend to make use of a 100% offset loan for this purpose soon, and would appreciate any further advice.

David.[shades2]

Bravesparrow