Yes Peter there is nothing new there.

The security upon which the loan is based on is neither here nor there as it the Loan contract itself which is important.

If the lender was prepared to lend against cash then you could probably sell the house and give them the balance of the sale proceeds as security for the outstanding debts. All they would want is 100-125% of cover in cash but would save you an ERP.

Interesting amendment to lodoc lending from QBE PMI that they have now refused to provide cover on any future lodoc refinance an action which is certainly likely to have an effect on future deals.

Purchases are still ok but refnances are out.

sorry repeated post.

Im thinking of buying my PPOR and renting it out for about 5 years. In the meantime, my partner and I will be making massive repayments to the loan so that it will be paid out hopefully in 5-8 years. (We will be most likely be chucking in anywhere between 2.5 – 3.5k in extra repayments a month.

Stating the journey is probably the hardest part so good luck to you if you have decied this is the year to take the plunge. Just remember at the moment the increased First Home Owners Grant is only until the 30th June 2009 at this stage when it will be reviewed so might be better to look at the first half of the year when it comes to going to Contract.

With regards to repaying the debt i personally would not adopt such a strategy. Paying the loan off is finite and whilst with many loans they have a redraw facility the interest 2nd time round will not be deductible.

Take the loan as interest only loan linked to a 100% offset account (I would even take a 95% LVR from day one and deposit your  First Home Buyers Grant into the offset A/c) and put as much money in the offset account. If you are able to be discliplined then make that your prime account and have your salary etc deposited into this account.

The offset will preserve the tax deductability of the interest as well as giving you immediate access to your savings.

my questions are:

1. when it is rented out, are the payments tax deductible? ( i am guessing the principal part of the monthly payment is not tax deductible)

The interest is deductible from the day the property is available for rent even though it may not be actually rented. The principal is not deductible.

2. In order for me to get the FHOG, i have to live in the house for at least 6 months for the first 12 months. Can i live in the house for the first 6 months, rent it out, and everything afterwards still be considered tax deductible? 

Yes 6 months within the first 12 months after settlement wil satify the FHOG conditions. Once the property is available for rent then interest, depreciation and buulding write off if available will all be deductible.

3. what are your thoughts on this strategy??

My reason for doing this is because i currently live rent free, i am able to quickly repay my home. Would it just be better to keep the house as an IP only, and focus on paying it off?

As indicated there are better strategies out there with the same savings effect in order to reach your eventual growth goals.

Your mortgage broker as long as he has experience in the investment property market should be able to map out a suitable path for you to enable you to keep moving forward.

The key to any strategy is FLEXIBILITY.

Regretfuly the pre-approval was probably not worth the paper it was written so the fact that it ran out was neither here nor there.

Construction funding is getting harder to obtain especially on lodoc and all lenders and mortgage insurers have tightened up.

To be honest CBA have probably tightened more than most over the last 3 months so the additional requirements are not unexpected.

Half the battle is knowing what the mortgage insurers will accept rather than the Bank and with somone like CBA you have no chance of finding out.

It will only affect you if you wish to use the property to release some equity out of.

I think if you wait until nearer the loan expiry date and compare rates then as many lenders are sharpening their pencils.

Terry i agree i was thinking short term whilst he expands his portfolio.

To sell the complete property into Trust In Qld is not going to be a cheap exercise and would depend on the occupation or profession of Drabs.

Start

Dont accept the valuation report provided by the Vendoor because without being funny he s unlkely to give you one where the property has been downvalued. It wil also liey to be done by some company not acceptable to any conventional lender.

Get your mortgage broker to commission an independant one for you once you have the Contract to hand and see what comes in.

Yes you may find that the prices have been cut accordingly and that you are buying vaue for money but you have to ask yourself if the furniture package is included in the price at no cost ….. why ?  

Peter

It will vary from State to State depending on the Transfer value.

Hi Keiko

Might want to re-ask that question in a weeks time or so.

With a 1% RBA cut in official interest rates on Tuesday many lenders will change their pricing over the next week or so.

Commercial lodoc rates havent fallen that much to be honest despite the numorous recent rate reductions.