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KC1
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@kc1
Join Date: 2008
Post Count: 6
May 17, 2008 - 12:08 am
Right. i think I have it now! Thanks one and all…
How would this be for a strategy.
1. Get my PPOR valued. I can either pay for someone to do that or get a freebie valuation perhaps from a variety of real estate agents
2. Find out if I can switch my loan to offset and interest only (but make a decision if I'm confident enough to release my 5 year fixed rate which is cheap as chips first). If a am…
3. Speak to the banks and get a feel for their confidence in my ability to pay off the 2 loans
3. Work out what additional $$$ that frees up and consider an IP.
4. Do 3 only if I can cover possible interest rated hikes in a somewhat uncertain market
5. If I don't do this now then invest the extra $$$ in shares (or elsewhere) and wait a couple of years until things stabilise
6. When the time is right buy the 2nd property which as cadan says is a good strategy IF you're covered for the things that could potentially go wrong.
Thank you so much everyone; I think I'm a bit less green now!
KC1
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@kc1
Join Date: 2008
Post Count: 6
May 15, 2008 - 1:01 am
The psychology of fear and greed is surely worth a discussion.
The fear/greed mentality is pervasive.
Scamp's ideas about people operating from fear is pretty spot on. Fear of missing out and greed fed by wanting more and more is a strong driver for most people. Your average person knows very little about the cycles of the market and operates from this place and based on how the media plays it.
It's refreshing to hear someone comment on this.
What's happening in the UK right now?
KC1
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@kc1
Join Date: 2008
Post Count: 6
May 15, 2008 - 12:42 am
I'm sorry if you thought that was the end of the story…
Can I just check that I've got it….
Richard you say 'serviceability'. Do you mean my ability to manage two loans?
If an offset account that is interest only means my loan is more 'serviceable' does it mean:
1. I am paying less on mortgage 1 therefore I can handle property 2 better
The underlying principle of an interest only loan escapes me! Though I understand that there are some benefits in making the tax easier to calculate.
If property prices are all increasing (decreasing) at pretty much as the same rate….then in five years if I sell two apartments to buy one house using this strategy I'll be no further ahead because I've really made no additional payments to increase my actual wealth but will have only paid the minimum on the loan… oh dear…I think I'm just confusing myself…
KC1
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@kc1
Join Date: 2008
Post Count: 6
May 14, 2008 - 6:44 am
Geesh I'm so green….PPOR? Uhm it's my first property, I live in it. It's in St Kilda …art deco…. 2bdrms.
Thanks for your help. I'm not keen to overextend myself … I thought it might be an idea to use the equity to buy a studio or cheap 1 bedder in the area which, if I save up 20% deposit covering mortgage insurance (by working a bit more)…might increase nicely over time….or something like that….
Then I read the forums and people seem to be doing all these amazing things with taxes and special loans and I just wonder if there are smarter ways to use my $$$ to end up in the house I want.
KC1
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@kc1
Join Date: 2008
Post Count: 6
May 13, 2008 - 6:23 am
OK.. thanks for the advice. This is still very new to me so I appreciate the advice.
What I don't get is…surely paying off the loan is a good thing? I have a standard fixed loan for 5 yrs. The rate is low. I pay off more than I need to. I thought paying off the principle was a sensible idea?
Then when I'm ready (after the predicted market crash if you follow the thread mentioned above! ) I've got a fair bit of ready cash sitting on the loan?