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Hi Guys,
Thanks for all the excellent comments posted here, especially from Richard. The reason I am not paying off the mortgage is due to the fact I am actually in a fixed interest home loan instead of the variable home loan, we optioned to fix our home loan just 5 months before all the interest rises, I always thought I have made a good decision back then (6 interest rate rises now) but now I am not too sure. Our fixed interest rate wont expire until 2014, which means if I were to pay off the home loan altogether, high penalties will apply and I am not sure if this is the wise action to take. The money is currently in a offset account offsetting against interest. This puts me back into the position I am now in. Because I think paying off the whole mortgage might be out of the question????
I have spoken to the bank in regards to how much I can borrow if I were to pay off the mortgage completely and using the equity in the house to borrow to invest, the figure I got is actually surprisingly smaller than the option they are offering me now due to the fact that my wife is not able to work, and the income I am getting is not sufficent enough to warrant a full borrowing amount of $340000 + Fees, which I think will be around $355000 once it is all finalised.
I was reading some comments by others that a company/family trust might be the way. Not sure how does that works but since my turnovers are so small on the small business (my income still comes from wages mainly), would they even allow me to set up such trusts?
The other thing is how do I structure the names on the IP? I am thinking off going 50/50???? And does an IP worth $340000 attracts land tax? I went to the website on the land tax and it says its 0.09 cents for every $1 over the $300000 mark. Does that mean I need to pay an annual land tax of $3600 a year on the land??????
Thanks heaps in advance guys.
Regards
Ed
Oh by the way, I just dug my loan documentations out and the loan we are able to secure is called a Low Doc Loan, the bank are not able to do that on the traditional loan because $25000 of my income are through small business. But since we are wtih the bank for a few years and our mortgage are also with them. They gave us a life time discount of 1% on the Low Doc Loans, so instead of paying an hefty 7.89% we are only paying 6.89%, which I believe even comparing to standard loan it is pretty good. But the only thing is we need to put down a deposit of at least 30% on the purchase or they will not lend us the money. Hope this information helps. I see there is another post on the similar situation by Goodonservice but I honestly dont see why would they put down $100000 as deposit? Because I know the more gear the IP has the better it is for the negative gearing. But in my situation where my wife cant work and bank are demanding a high deposit I am bit lost on what should we do or should we just forget about this IP thing altogether?
Thanks again
ED
