Forum Replies Created
Wyeth,
Thanks for doing a better job of explaining the way loans work than what I did!!
cheers
Sonya
Hi Todd, From your statement it appears that even though your are paying more than what you are required to pay every month, your principal (The original amount that you borrowed) is not being reduced. for example. lets say you originally borrowed $10,000 and have to repay $250 per month. For the first few years this amount is only paying the interest component of the loan not usually any of the principal. Now if you choose to pay $500 per month some loans will reduce the principal by the extra amount you have paid. Now bringing the principal down to $9,750. Therefore your interest that you pay will also be slightly reduced because the amount of money outstanding is less. I am not very good at explaining this. The best suggestion I can give is for you to call the loan provider and ask them directly "If I pay more than expected payment per month does this reduce the principal of my loan? " Also ask "can I pay the loan off sooner? Are there any penalties for doing so? "
Sorry I couldn't explain it better, when I reread this post it doesn't explain it as clearly as I would hope.
cheers
Sonya
HI have bought all of my properties 'sight unseen'. I rely on speaking to a number of real estate agents in the area, focussing on the property managers as they are the ones who have to find tenants for the property so they give the most honest answers regarding the better areas and types of homes that rent well.
You can also google different towns of interest to have a look at the council plans and proposed developments to guage if the town will have a strong rental demand.
cheers and good luck
sonya
Todd,
Why are you apying so much on the loan for $6300? you are already in advance on this loan and don't appear to be reducing your principal at all. Double check this with your provider. If you are not reducing your prinicpal then pay off the debts that you can reduce the principal on, such as the credit card, which could be paid off in full in one month.
cheers
Sonya
Michael,
by having the balance of your deposit in the offset account your loan is effectively reduced by by the amount sitting in the account, therefore you pay interest on a lower amount. For exampple if you have a loan for 210K and you ahve 20k sitting in your offset account you only pay imterest on 190k ie 210K-20K =190k loan amount.
i hope this makes sense
cheers
SonyaLina, If you are happy there and know the area then i can't see why it would be a bad investment, you at least have a feel for the area which you may not have if you are looking elxewhere to buy. if you do buy set your loan up with an offest account and have all of your income go into this account. if in the future you choose to buy elsewhere and have this property as an IP then you can use the money in the offset account as a deposit. Utilisie the free service offered on this forum to get an up to date valuation on the property, so you know aht would be a fair price. Make sure that you do all the normal due diligence such as pest and building inspections, investigating the financial position of the strata acoounts etc. Also it is a good idea to be on the strata management committee so you are aware of any financial and building management decisions that are being made.
Cheers
Sonya
Todd, from your statement it appears that you are not reducing the principal amount that you owe, so this extra money that you are paying on that loan is effectively doing nothing. You need to contact the loan provider and see whether the tems can be changed in some way to allow this extra money to reduce the rpincipal amount. If this is not possible or incurrs penalty charges then focus on paying the other debts that allow the principal to be reduced by extra payments such as the credit card debt.
cheers
Sonya
Todd,
Make sure that any extra payments that you make on each debt goes towards reducing the principal amount rather than just being seen as your payments 'in advance'. Some loans do not reduce the principal when you make extra payments. if this is the case with any of your debts, check with the funds provider to see if this can be varied.
if you can stick to the commitment to pay $750 in total towrds these debts you should knock them over quite quickly. Cheers Sonya
Be wary of getting a lower rate loan and then taking longer to pay it off, because in the long run you care going to pay way too much for depreciating objects. if you do consolidate all the debts into a lower rate loan then attack the debt as quickly as you can, paying the absolute maximum that you can afford to pay it off. Then if you can maintain this level of payments put that same amount of money into an account to build up a decent deposit for your firat property purcahse. good luck, cheers Sonya
Thanks Mike for the fast reply, you provide a great service,much appreciated.
Cheers
SonyaHI Michael, welcome to the forum. I would suggest buying something in the lower end of the market like you have said, however don't aim to pay it off, get an IO loan and a 100% offset account. Have all of your income go into the offset account. This will allow you to reduce interest payments whilst also being able to accumulate more money as a deposit on another IP. There is heaps of info on here regarding the best financial structure.
cheers
Sonya
From the date that you put tenants into your PPOR it became an IP. this date shoudl be used to calculate things such as capital gains % if you sell as well as for taxation purposes, although you probably would not have a lot of deductions if you own the property outright. cheers Sonya
Hey,
I would happily take your $1500 if you want to give it away. Surely if you have the borrowing capacity that is required to service an IP then you could find a reputable lender from the myriad of lenders on offer here in Australia?
cheers
Sonya
I don' t want to be rude, but having been thru a divorce where I was a joint owner of the property yet still got done over I would be asking how long you have been with your boyfriend and how secure is the relationship? Unfortunately relationships do break down and if you are not legally noted as a joint owner of the property you may lose a large wad of cash, especially if you have 'given' your boyfriend money to show evidence of 'savings'
cheers
Sonya
Hi Rhys,
Great name, my son is also called Rhys.
Before you get started make sure that you have the best financial structure in place to enable you to have the most flexibility as well as making sure that you can get all appropriate tax deductions etc. As mentioned it is better to not pay off your present loan as such, instead have a 100% mortgage offset account so that if you move and this property becomes an IP you can claim as much as possible from tax as well as use the money that accumulated in the offset account to pay deposits etc on new properties.
Also make all loans Inerest Only so that you have more money each month to put towards new properties.
Also when you buy if you want your Fiancee to be listed as co-owner you are probably best to have her as a 'Tenant in common ' or have her share as 1% and yourself as 99% owner so ha you can claim any costs on your tax as you are the primary earner at this stage of your investing.Hope this helps, as you said there are lots of good posts especially with regards to the best financial structures.
Cheers
Sonya
Hi, not sure how increasing your own personal property and therefore loan would be of benefit in buying an investment property. Also selling and buying again means that you will 'lose' a lot of money in stamp duty costs, agents fees etc. if you are happy with your present house keep it and use the equity to buy an investment property. I think you would learn a lot from reading past posts on structuring your finance for the best return on your money.
cheers
Sonya
Hi Is it common practice to see the valuation when you buy a property, or have you sought a valuation after you bought to determine your equity?
I have not seen valuations of properties that I have bought. I have only been told that valuation was favourable and thus loan was approved.
The only valuation that I did see was for a property that was significantly below purchase price which I subsequently did not proceed with the puchase of.
cheers
SonyaHi Bencross, I actually live in griffith and don't think the rental yield is that crash hot, however, if someone is thinking of buying here I would be happy to give you some inside info on the specific street/s you are looking at. I am also happy to inspect properties to let you know what i think of them before you go to the trouble and expense of getting pest and building inspections.
I own my own PPOR and have three soon to be four investment properties (none of my IPs are in griffith)cheers
Sonya
Hi Kat,
What does your partner intend to do with his existing house? Will he rent it out and will the rent cover the costs associated with holding the property? Perhaps you can retain that property and rent somewhere else, where you want to live. Also if he does keep the property make sure that you the loans structured properly, ie having it as an Investment Only loan and having an off-set account against the loan to reduce interest payments as much as possible, whilst not 'locking' these extra payments in. Then when you have enough money for a deposit you can use the money from the offset account as a deposit. I hope this makes sense and good luck with your new baby. having a baby is probably the most amazing experience you will ever have
Cheers
Sonya
Hi I have found some bargains on ebay as well as at garage sales and op shops. Ebay allows you to look for specific items from home and if you are in a larger regional town or city you are likely to have a n umber of items within a short distance from your home or property. Also deceased estate auctions or garage sales may have a whole house full of furniture to choose from.
Cheers
Sonya
