Again I'm not an accountant, but the good ones seem to advise against claiming interest on capitalised interest.  I don't think capitalising it's bad – quite the contrary.  But to keep my nose clean and beyond reproach, I wouldn't claim it.  The ATO seeks and destroys schemes designed to avoid tax, so if that is the goal, forget about it; but as my wise peers have already suggested, if it's a necessary means to a different end, get individual advice from an accountant, and even seek a private ruling for yourself!

Buyer beware. It's a very sad, unfortunate situation.  Let me share some sunshine.  I know a private day trader (took private investor money in 100k increments and played the markets) who lost everything – and was responsible and displayed incredible, independent integrity.

He sold his assetts to pay back his investors, when he could have closed down the company and kept his houses, which were protected from such an event.  He has since bounced back, and is now a financial planner.  Mistakes don't make us untrustworthy, failings don't make us failures.  Our responses to life's curve balls are what identify men from mice, and integrity from insincerity.

This isn't a one off.  I know of at least one more development company director who did likewise, and it wasn't even his responsibility, but he didn't become bitter or selfish.  If only THESE stories were on tv.

What's sad is that future good advice and opportunities may be missed by people now too scared to trust anyone, and that has robbed those nice people as well. Buyer beware.

Hi Sdem,

I reckon most members of this forum would agree there's no such thing as a dumb question as we're all at different stages of experience in different areas of property investing.  In fact, if there was such a thing, a dumb question is cheaper than a dumb mistake!  So keep 'em coming.

Count up all the ongoing costs of an investment: loan interest, rates, body corporate, maintenance, landlord insurance, property management, and anything else you can think of; and then add up all your cash coming in: rent, tax refunds… and that's about it!  If your cash coming in is greater than your cash going out, you're cash positive (in my opinion). Some punters only count loan interest, but the definition is not as important as knowing what you're really putting in your pocket or paying out each (average) week.

Cross collateralisation or cross securitisation is where all your properties are security for all your mortgages.  I don't think it's the end of the world to do so, especially if you have a long term view to your holdings.  Properties can be discharged individually as long as the remaining properties are acceptable security for your remaining debts under the lender's policies.  The bank selling everything up from under you is likely to only happen if you fall asleep at the wheel.  If things aren't going well, it's better to pre-emptively refinance or partially sell off so you can stay in control.  That way your sales aren't "mortgagee fire-sales", and you have less pressure and can get a better price.

It's also less suitable if you're already planning on selling one or more in the next few years.  It's easy enough as an alternative to borrow up to 80 or 90% against each property and allocate the funds to new or different investments.

As to being locked in to one lender, if the lender's got great products, rates and service, is that really a problem?

 World Changer's absolutely right about get backing up on the horse.  The greatest risk is doing nothing.  Get great advice.  So best of luck, and don't forget to research each decision well, but not so well that your head spins and you get information overload and end up doing something out of impatience.

Hmmm. Is that a quote from the guidelines?  I'm certainly open to being wrong, and thankful for the heads up if so. 
It certainly is news to me though…

OK.  Make sure you get an estimate (can only be indicative in early stages) of the total costs including mortgage duty and lenders mortgage insurance so you can count the cost and weigh it up against the benefits.  Emotional benefits are still important.  Cash flow relief is very valid, and if you make sure you've got some flexibility, you can up your repayments when times are better without changing anything.

Any variable rate you can get less than 7.5% is good at the moment, depending on the features you're also wanting like an offset account, splits or redraw.  The standard rate is what banks advertise so you can appreciate the discounts they offer, and is 8.07% at most lenders at the moment.

The benefit of a .35% discount on $225,000 is $65 / month – were you including savings on the consolidated car loan?  If sensitive to cash flow, add up the current repayments on all loans being refinanced, and compare to the new loan repayments to assess the real help it may be.

Another method of conserving cash is going interest only for 5 years – sounds horrific, but doesn't mean you can't pay off the principle any time you can spare the cash.  It can give you a little discretion about when to use the breathing room and when to pay off more than the interest.

Hope this helps more,

Dave.

Hi Passnby,

If I may add my two cents worth, I do mortgage and finance advice for a living. What other have contributed is pretty sensible for the most part.  The maths of refinancing when you have to pay Lenders Mortgage Insurance (anything over 80% of your home value) doesn't really justify the potential short term savings.  If there's a different goal, eg relieving cash flow pressures, a significant purchase etc, that needs to be weighed with the fact of the extra costs – is it worth several thousand dollars of extra debt which you have to pay off one day?

With your car loan and the wisdom of consolidating, IF the current repayments aren't uncomfortable, consolidating the debts AND the repayments means you'll pay off the car loan quicker and cheaper because you keep making the same repayments while the interest charges reduce with the lower rate.  THEN when that portion of the debt is gone, KEEP making the payments that have been not uncomfortable for 3-5 years but to your remaining, and you will hose it down!

It's fantastic to assess each year, but this year it seems from what you've said cooling your heels and waiting for capital growth to take Lenders Mortgage Insurance out of the equation would be a sensible idea.  Perhaps the best advice would be to ask friends for referrals to a reputable mortgage broker or two and get a second or third opinion from someone who's fully assessed your circumstances and options.

Best of luck, Dave Pellowe