I think they may mean “permanent part time” which is secure employment and just like permanent full time except less hours. Casual, as you say, is not secure whether its part time or full time hours.

I can see how being permanent, whether it’s full time or part time, is fine for borrowing money, but I don’t know about casual.

Maybe one of the mortgage brokers can clarify.

Hi Mitcheos

There are some lenders from whom you can borrow on a lo doc basis and have it revert to a full doc situation when you are able to meet the criteria.

Macquarie, for one, do this but i’m not sure about borrowing 90%.

Hi Jaypee

Yes, if you want to eventually own the house, you just pay off the principle.

Investors don’t tend to do that though as they are interested in getting the best returns from their money. That’s why you borrow in the first place.

Think about the return you would get from owning a house outright. If it’s your $300,000 in the house, your return might be 3% or so. If you only have $60,000 then your return could be 8 or 9% plus you have $240,000 invested elswhere at another 8 or 9%.

So, compare a passive income of $9000 with $24,000pa before you decide whether or not to pay out investment loans.

Someone feel free to correct my math if I’ve completely stuffed that up. I’m a bit tired.

With regard to the notion of “owning” a house, I’m not sure that ever happens. Just stop paying the rates for a couple of years and you’ll find out who really owns “your” house.

Investment properties and loans are simply a vehicle to make money, that’s all. For peace of mind and security pay off your PPOR by all means, but paying off an investment property is sort of defeating the purpose. That’s providing it is not heavily negatively geared.

Hi Ninie

Consider this. Say you bought a house 20 years ago for say $60,000, you borrowed 80% or $48,000. You only pay the interest on the loan, not the pricipal. Today, you still owe $48,000 but the house is worth $300,000 and you get $350 a week in rent. Although you haven’t paid anything off the principal, it has decreased relative to the value of the home, and, as you have mentioned you’ve had the extra cash flow for other investments and all repayments are tax deductible.

If you’ve picked up on the difference between “good debt” and “bad debt” and can see the benefits of leveraging your money, you can see why investors are trying to maximise their loans (getting equity loans when a property goes up in value) rather than minimising their loans by paying off the principle.

Generally with an IO loan, if it’s not fixed interest, you can make extra repayments which come off the principle, thereby reducing your interest payments. You can then redraw those extra payments as needed (for investment purposes only).

Or again, you have an offset account to reduce the interest repayments, then there are no tax issues if you use the money for non investment purposes.

What I mean by leveraging your money is if you have loan of 80% on a house and that house goes up in value by 20% in a given time period, you have effectively doubled your invested capital (ie, house costs $100,000, you have $20,000 of your own money in it and the bank has $80,000). Value goes up by 20% to $120,000. You still only owe the bank $80k so you now have $40k in equity.

If you used all your own money and bought a house for $20,000 and it went up by 20%, you’ve only increased your equity by $4,000

I hope that’s no thoroughly confusing.

I had a strange situation recently on a contract where I didn’t want to put down a huge deposit. The REA wrote down that I would pay $500 or whatever deposit on exchange of contracts and 10% deposit payable at settlement. Apparently this would make the vendor feel better about it since they are getting a 10% deposit. Maybe they’re supposed to not notice that it isn’t payable until settlement? I thought it was all a bit strange myself. This happened in QLD.

Dazzling, what an inspired post. How truly intelligent you are! [grad]

Depends a lot on what your goals are. What do you hope to acheive by buying this property? Is it an IP or PPOR? With that in mind, you’ll be better able to work out whether or not it’s a good one. Look at the rental return, BC fees for a flat, rates, location (is it inner city or further out). How long do you expect to keep it? Give us some more info and maybe someone can give you some more specific advice.

You can try http://www.diyhomesell.com.au and/or http://www.privatelisting.com.au to start with. Also do a search on this forum under “private sale” for some tips.

You might find that a good REA will get a better price than you could yourself that will cover his/her own commission. The trick is to find a good one. You can also sign on an agent as “sole agency”, this means you can still sell it yourself without having to pay the REA.