You should always set up your loan structuring sooner rather than later. As to how much to borrow, I prefer to go to the maximum I can afford every time I restructure to save me having to do it again more often. There are also ongoing costs and unexpected costs that arise so more than what you need is always better. You only pay for what you use and it costs the same in application and setup fees to get more upfront as it would cost to get just what you need.

Offset accounts are always best used against non-deductible debt. I think you have got it.

Regarding your thinking, it comes down to what you want. If you want to improve your cashflow, negative gearing should be avoided as this reduces cash flow. Other implications such as capital gains should be considered and discussed with your Accountant.

The Mortgage Adviser

In NSW, the only thing a vendor can do when a contract falls over is recover the deposit they are entitled to – 10%.

The Mortgage Adviser

I prefer houses. Also, I would invest now if it was affordable. Smart investing will improve your cash position and help you pay off your home quicker.

The Mortgage Adviser

You only need to live in a property for 6 months to be eligible for the FHOG…

http://www.fhog.info

You can borrow 106% in some cases. This depends on your ability to service the debt. If you borrow more than 95%, the interest rate will be considerably higher. If you borrow between 80% and 95%, mortgage insurance will be payable if they accept the property. The mortgage insurers do no like studios and they do not like inner city (especially Sydney) so you are facing a double whammy.

Going to a lender who does not mortgage insure their loans above 80% will cost you in fees and interest rate.

Talk to a different mortgage adviser / broker for all the options.

As for data, try some of the Property Research links at…

http://www.themortgageadviser.com.au/index_files/essential_links.htm

I can assure you that there is not much capital growth in studios as I have an office in Darlinghurst and watch these prices all the time. There are some exceptions though.

The Mortgage Adviser

I am totally against using a LOC as everyone here knows. As for a P&I loan on an investment property, this is the most ridiculous advice I have ever heard offered to a borrower by a mortgage broker. I would not be using that broker any time soon.

Investments should always be interest only as it maximises your options. If you want to reduce debt, don’t pay into the loan but attach an offset account so you still have a lot of flexibility.

I don’t know why you think it is frustrating and costly to change loans as it is usually a very simple and fairly cheap process (less than $1,000) unless you are tied down with fixed loans or other break costs.

The Mortgage Adviser

If you use your cash in the offset it will not be deductible as you are paying cash and you will increase your non-deducible expense. This is a bad idea.

As outlined earlier, you should have another split loan for deposits and expenses for deductible expenditure. This loan should also be interest only so you can continue to obtain benefits from your offset account.

You can knock off half the ‘cost’ of your home loan in the same way using an interest only loan with offset account without having to pay it into the loan. You should only use this if you are good with money.

Why do you want another negatively geared property if you cannot service it? It will only make your cashflow position even worse especially if there is no tenant for a period of time or something else goes wrong.

The Mortgage Adviser

Property is not the only investment that is positive cashflow. The time to invest is always now. I think looking at your 2000 purchase that has doubled in less than 5 years should be a good influence.

Have a look around at your options before settling on property. You might even consider idirectly investing in property through Listed Property Trusts. The return should be higher than the cost of funds you borrow to invest and you can get out pretty quickly should things go wrong.

The Mortgage Adviser

When you start tossing fixed loans into the mix, it gets more expensive. Your loan contract will tell you how much it costs to get out.

You do not need to refinance anything to buy additional properties. Even if you have a fixed loan, you can add a split loan if you have additional equity. The new property can stand alone.

I say stay away fro LOCs and stick to the simple stuff. Interest Only all the way on investment properties and Interest Only with Offset on non-deductible debt. This provides the most flexibility and the cheapest costs.

The Mortgage Adviser

In my opinion, ‘consideration’ in contract law must be something of tangible value. A promise is not something of tangible value. In any case, I consider the ‘promise’ to pay a certain amount as the offer. For example…

Buyer A OFFERS Seller A 100k with conditions.
Seller A ACCEPTS Buyer B’s OFFER with those conditions.

Where is the ‘Consideration’?

West, No Deposit has been around forever and a day. It comes down to negotiation and what motivates the parties. As I said earlier, I would not waste my time with someone who would not pay a deposit. The only exception may be where the person demonstrated they had a lot of equity available from where the funds were coming and were just illiquid at the current time.

The Mortgage Adviser