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Here is what I would do:
For your IP your probably on a rate of about 7.85 based on my calculations. I would refinance that, taking a new loan for $256k (80% of current value) and adding $81k from your savings. You probably won’t be able to get a larger loan without mortgage insurance. I have seen rates as low as 6.59% recently, meaning your monthly repayments on an IO loan would drop to around $1400. Depending on your DP this could then be positively geared.
Depending on your income/cashflow you would be in a very good financial position to purchase a $350k property. I would put down 70k as the deposit and get a IO loan with an offset account. Anything left over after that should be placed in the offset account.
Once your cash arrives from the UK you would have around $80k in the offset account. Leaving you in a strong position should you wish to invest further, either in property or diversifying into other asset classes, or just making your PPOR loan very managable.
Cheers, Pete
Or alternatively if you were to push both loans to 90% LVR you could extract 40K from the current property ((400 * 0.9) – 320), and then purchase another 400k property with a 40k deposit. This is assuming you are able to come up with the purchasing costs and LMI as well, which would be around 20-25k.
I don't know your situation but if you haven't paid anything off your currenty loan and don't have any savings doing this might be a little too risky.
Thanks,
PeteHi FineThanks,
Before going any further I would recommend the book http://www.amazon.com/Aussie-Expat-Luckiest-Person-Earth/dp/9810575467. There are a number of tips which I found useful when moving back to Australia after living in Singapore.
Ordinarily I would pay cash if buying to live in and then each time I bought an investment property create a new mortgage account on on your residence to cover the first 20% and purchasing costs of the investment property.
HOWEVER, at the moment the Australian Dollar is at 25 year high against the USD (and most other currencies) and is predicted to remain that way for the majority of 2011. Therefore you may wish to only send to Australia as little as possible and wait for a downward cycle in the value of the AUD.
I would look for an accountant where you are located at the moment that deals with Australian Expats, and ask them for advice. The tax rates where you are located at the moment will determine if you are better off becoming an Australian resident for tax purposes before you are paid.
Thanks,
Pete
