Ok here’s my thinking – we have approval for a loan for an investment plus a refinance which will see us saving heaps.
My goals – I want to have an income when I retire and I want to rebuild my house. I am currently 35 but have a bad habit of wanting things now.
What if I were to change my current house I am living in (I’ve been living in since 2002) into an investment and I go and rent – namely looking at something close to my boys primary school with 4 bedrooms which we will need with the planning of a third baby in the near future.
Added to this I was thinking we could still purchase a smaller investment property…so in effect we’d have 2 investments. Does that make sense and is that a good idea?
Is it then better as we are setting up our refinance with an offset account to have our current home changed to interest only which will be covered by the rental?
kat13 wrote:Is it then better as we are setting up our refinance with an offset account to have our current home changed to interest only which will be covered by the rental?Hi Kat
What's your primary reason behind renting? Is it to save money and/or enhance your borrowing capacity to purchase IPs?
If so, you need to crunch the numbers on the costs of living in your PPOR (paying a mortgage with no rent coming in) vs paying rent elsewhere (but having rent coming for your former PPOR).
Interest only with an offset is a good idea – it provides flexibility.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
My main reasons for thinking about this was so we had more room – as we are planning another baby in near future. We would save somewhat as we’d be paying less for rent and our mortgage (doing it by interest only) would be well and truly covered.
Ideally I thought this because I liked the idea that I would also be able to use the finance we are getting for another property to invest in rather than having to wait for capital gains to use equity.
I have developed a fair few spreadsheets regarding property investing, buying verse renting was a spreadsheet I made, I could offer you a copy if you wish? However I feel it may not work perfectly in your situation.
I would be happy to develop a custom one for you though, I enjoy a challenge and like to try and develop a database of spreadsheets that hopefully I can use to help my investments in the future.
It would be the best way to see the financial side of the decision, obviously there is a lot of sentiment to be taken into account, but only you would be able to look into this.
Interested in the spreadsheets streamlineinvesting – are you able to message me your email or something?
kat13 wrote:Interested in the spreadsheets streamlineinvesting – are you able to message me your email or something?you were not accepting emails, but below is my email, feel free to contact me
Not sure why that happened, my account seems to be set to allow emails?? Anyhow I’ll shoot through an email to you tomorrow.
With respect to turning your current PPR into an investment property there is a major consideration that you need to sort out before you do it. Assuming that you have paid down the loan a fair bit and have a decent chunk if equity as you bought in 02 then you need to work out the interest deductibility when it become an investment. If you don’t change anything with the existing loan and continue to own it, but it is now an investment property then you can only deduct the interest on the current loan amount.
Whereas if you transferred it into a trust at the current bank valuation figure then you would maximise the deductibility of the debt. This way you trouser the gain on transfer CGT free now and then the trust has a big fully deductible loan. You will have to cop stamp duty on the transfer value but depending on the tax benefit (ie the size of the loan and your income tax band) this could be recouped in a couple of years and after that its all cream.
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