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From my experiences and dealings, you must have fixed price contract as the quotes can always blow out whereas a fixed price contract gives the banks the security of knowing that the job will come in at budget (and hence the lending is safe).
Owner builder jobs will generally only lend to about 60% of finished value (St George Bank is my suggestion of who to approach).
Are you planning to do the renovation yourself?
Some lenders will give you the money for the renovation (similar to a construction loan), as long as you have a fixed price building contract. That way you might also get the bank to do a valuation based on the "completed" value of the property.Do you have to move ouy into the new property?
If you can't move your current home to another owner and tax breaks are a must then have you investigated buying the next property as an IP?
The share market is a totally different mindset so it would be best to get some education there as well.
Not sure where you live but if you are in Melbourne a good place to start is The Educated Investor bookshop in the CBD.
You'll find a heap of places that'll charge to teach you, but best to have a look at a few first and make your mind up from there.
You should also see a broker just to go through your finances and whether or not you can afford that next property…
Yes, however right now you can't claim anything as you live in the property.
But when you purchase your next property, you can use any offset account against that debt and reduce the interest payable.
The debt against your current property ($240K) will then be tax deducatable and as it is a higher debt, you get a greater tax deductability.
The $50K will give you leverage, no doubt about that and can be used if you want to reduce your LVRs and the LMI you would pay. It does also buy you time for your loan repayments if things go awry.
If you are turning your existing property into an IP, then the higher the debt you have against it, the higher the tax deductions you can make in the future. To keep the debt higher and not pay the interest on it now, you can park the $50K in an offset account against the loan (which will offset the interest). That way it is also be readily available for use if you want to put down a deposit on the next property.
Hi Ryan,
Depends what is best for you – service or savings?
The difference in interest rates means Homeside will save you $640 in interest and $275 in costs, which is a pretty compelling argument (although Homeside/NAB have a lower SV rate and I'd expect these rates to get back to parity with STG eventually). The $120 annual fee is for each loan you have with them, so if you split out the loan into two portions (say a standard variable and LOC) you'll be charged $120 on each.
I find the service with St George much better personally on the loans I have submitted and based on client satisfaction, but every bank can have problems.
The St George offset account has a glitch for owner occupied loans (it's called an offset account with no repayment offset option) that means it isn't a "true" 100% offset account (This will change when the property is an IP)…
Remember that the difficulties with the loan is for the broker to deal with – that's what we get paid commisisons for, so worry about what's best for you.
Get both once off and then see which you prefer (I like API's databank pages)
You won't be able to release the full 80% as the bank will only lend up to a certain Loan to Value Ratio (LVR) against the value.
Based on a 90% LVR loan for the $320K property ($288K) would free up $48K in equity and LMI would be in the range of $3,000 – $4,000 (less if you paid LMI initially and stayed with the same lender).
With that $48K equity you could get your $475K new home but would need to be a 95% LVR deal that would be in the vicinity of $15,000.
Remember also that if you can get a higher valuation than the $320K you think it is worth, you will be able to extract more equity from the property.
There are lenders available for both loans that would also include the LMI in the loan so you may not be out of pocket. Although LMI is expensive it does enable you to get those properties.
Definitely keep the properties separate with the loans (ie don't cross the properties) as this will give you more control moving forward. You would want to release the equity as a sparate loan from your initial loan for tax reasons.
As long as the investment purchase was made after July 2000 and neither you or your partner has been on title for a property you lived in, then you should be able to claim FHOG. Retrospective has been done before but best to put your case to the revenue office in your state and then you'll have the confidence to go for it.
Hi Pete,
If you want to balance out your cashflow, then renting it out and finding yourself a rental could help you do this. It will also expand your opportunities as you would also be able to find areas that are performing well that you yourself may not want to live in.
It also means you can pick and chose where you live yourself without getting into a long term purchase that you may regret.A risk here is if your property remains vacant for an extended period of time.
When it comes to taxation strategies it is always good to get some independent taxation advice to ensure you are not going to get burnt later on as well (things like the anti-avoidance provisions of the tax act).
Knowledge is Empowering
Lincoln Haugh
Empower Wealth
03 9326 8900
[email protected]
http://www.empowerwealth.com.au
Please note this does not constitute property or financial advice.Hi Daniel,
It depends what you’re after. If you want a CBD lifestyle then perhaps it might be worth a go, but if you’re after capital growth then the CBD apartment may not perform as well as other areas outside the CBD.
From personal experiences (before I got educated), I bought a CBD apartment, and it hasn’t appreciated nearly as much as property I could have bought at an equivalent value outside of the CBD. It’s a decision I still regret.
You might find better opportunities in inner city areas (3-10km from CBD) for about the same price, although you will be up for stamp duty and other costs and only $7K in the FHBG. These places won’t be as “new” as a CBD apartment either.Good luck with your research and feel free to come along to one of my complimentary First Home Buyer seminars if you want further education.
Knowledge is Empowering
Lincoln Haugh
Empower Wealth
03 9326 8900
[email protected]
http://www.empowerwealth.com.auPlease note this does not constitute property or financial advice.
If you pay Interest Only, it doesn't make a difference (if you are with the right bank) in paying it down of having the offset account.
This also keeps the cash free for deposit and costs for your investment property.There are also ways to restructure your current loan to help with any investment property to ensure you use as little cash as possible.
When you are investing, the loan against the investment property will have tax deductions available and generally the higher loan you can afford, the greater the tax benefit. And while you have that loan, keep an offset account against your home as those payments are not tax deductable and should be reduced where possible.
Knowledge is Empowering
Lincoln Haugh
Empower Wealth
03 9326 8900
[email protected]
http://www.empowerwealth.com.auIt will come down to what you want to take the refinance to (and what Lenders Mortgage Insurance you are willing to pay) and what the bank valuation comes in at.
If the valuation came in at $350K and you took it up to a 90% LVR (and paid the LMI fees), you could release $70K in equity, which is enough to cover the deposit the bank has suggested.
Just make sure you get the structuring right and don’t cross the properties!
Knowledge is Empowering
Lincoln Haugh
Empower Wealth
03 9326 8900
[email protected]
http://www.empowerwealth.com.auTerry and Richard both have good points.
It depends on what will make you feel more comfortable. Paying the loan down might give you comfort, whereas having the offset account buys you time.
Consider if you paid down say $200K into the loan and had the remaining $130K in the offset account. This will give you $130K worth of cover for payments that you might struggle to make on one income.
Compare this with $330K of cover…In both cases under IO you would be paying the same in interest repayments (if structured correctly).
It also depends on what you plan to do with the property you are living in. Do you plan to stay in it forever and buy an investment property or will you upsize and turn your current home into an investment property? These decisions will make big differences to the best setup for payments and offset accounts and getting it right now could save you considerable amounts in the future.
Knowledge is EmpoweringLincoln Haugh
Empower Wealth
03 9326 8900
[email protected]
http://www.empowerwealth.com.au
