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Thank guys for the input.
I have learned a lot of new things esp on loans these last 2 days through this forum. However, I still think that I don’t have my initial question answered; in our situation, shall we pay off our homeloan completely first (or at least half) or buy another cf+ IP?
Any input (but please don’t say,’up to you’) will be most appreciated.[cap]
Offset accounts are always best used against non-deductible debt. I think you have got it.At present, my home loan has no offset account. Instead, it’s a basic loan with redraw fasility.
Will it be ok? What is the drawback?Regarding your thinking, it comes down to what you want. If you want to improve your cashflow, negative gearing should be avoided as this reduces cash flow. Other implications such as capital gains should be considered and discussed with your Accountant.We want to improve our cashflow so we can comfortably service our loans.
You should always set up your loan structuring sooner rather than later.Can we set up a loan long before we need the money to buy the IP? How? Can you tell me step by step?
I think these are silly questions. But It would me more silly if I don’t ask and make mistakes.
So thanks beforehand [cap]If you use your cash in the offset it will not be deductible as you are paying cash and you will increase your non-deducible expense. This is a bad idea.This is new to me. Thanks. [cap]
As outlined earlier, you should have another split loan for deposits and expenses for deductible expenditure. This loan should also be interest only so you can continue to obtain benefits from your offset account.When should I set up this split loan? Now or just before the purchase of the next IPs?
How much can/should I borrow? To the max or just enuf for deposit and costs?You can knock off half the ‘cost’ of your home loan in the same way using an interest only loan with offset account without having to pay it into the loan. You should only use this if you are good with money.IO for the split loan and an offset account for the homeloan. Do I get it?
Why do you want another negatively geared property if you cannot service it? It will only make your cashflow position even worse especially if there is no tenant for a period of time or something else goes wrong.No. I don’t intend to buy a neg geared IP in the near future. I plan to buy a pos geared (or nearly) as we won’t see them many in the future. Am I thinking on the right track?
Originally posted by The Mortgage Adviser:You do not need to refinance anything to buy additional properties. Even if you have a fixed loan, you can add a split loan if you have additional equity. The new property can stand alone.
This ‘basic’ info is new to me. Thanks a lot, Rob(?).
I say stay away fro LOCs and stick to the simple stuff. Interest Only all the way on investment properties and Interest Only with Offset on non-deductible debt. This provides the most flexibility and the cheapest costs.
Thanks a lot. I got it!
Originally posted by Mortgage Hunter:I would consider IO for all loans and have an offset on the PPOR for all cashflow and savings.
Do not use this offset for anything except undeductible debt – ie another PPOR, car etc.
Simon, can I use the offset for deposit and the purchase cost for my next IP?
If you decide that your PPOR is your home forever then no need for the offset – just pay into that home loan and knock it over.
If you feel confident of getting another IP with some good potential for CG then by all means buy another one or more. The CG will make you more wealth than the amount you can pay down your PPOR – this is the beauty of leverage.
I may want to knock at least half of my homeloan first as I don’t think we can service our next inv loan if we neg gear it.
Thanks for your input guyz.
I know I should not have listened to the bank loan officer when he asked me to xcolled the loans. My PPOR then was worth $200K and I owed $135K. Nonetheless, I still got $25K which was enough to buy the 1st property. However, despite the dis, I thought I got the advantage on the Xcolled loans as I didn’t have to refinance (which costed money?) the existing non-tax-deductable home loan. And I thought I could have more tax deductable interest investment loan.(interest of $95K compared to $72K), while my homeloan didn’t have to increase because of the redrawal/draw-down for the IP deposit.
Was I wrong completely? Can someone help me understand this?
By the way, how much would it cost me if I refinanced my homeloan: P&I ($74K 4 yrs fix and $65K basic loan)?
What is the best borrowing structure for my next IP? Should I unXcoll my loans? How? Or do I just need to refinance and set up a Line of Credit loan before buying the next IP? But, how’s the best way to do it?
Hope you won’t get confused with my confusion.[buz2]
I am very new in this IP stuff. Your wise input will be valuable to me. I don’t want to make another mistake [cap]. Thanks…
