HELP

Hi Bev,

Unfortunately this scenario is all too common, and that makes me mad. I believe this is based on most financial service providors only ever recommending (or showing you) the products that they will be making the most money from, rather than the ones that best suit you and your objectives. They hide most of the products that are suitable under the table!!

I think I might be able to help you. I am a member of the Lifestyle Planner network (see http://www.exploreitall.com). Drop me an email and we will see what we can do – [email protected].

Regards,

Tim Wilson.

quote:

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The reasons now seem silly but at the time sounded like they would have helped us pay our loan off quicker and at less per month.

The reason l asked about living in our home while making it an investment property is for tax reasons. Is an invertment loan cheaper per month, if so how or who do we see about changing, can l change to an investement loan now that we have been living in the house for 3 yrs,or should we go and rent for awhile and put someone in our house to rent it, at the monent it would be cheaper for rent than a morgage.

Bev

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Hi Bev,

If your current loan is an expensive one, or it is not suited to your needs, then it may be worthwhile changing. Otherwise (as you know it can be an expensive process and you end up in the same position).

Paying a loan off more quickly requires payments above your minimum monthly / weekly/ fortnightly payment. So it is unlikely that by refinancing you will be able to pay your loan off more quickly unless the new loan has a cheaper interest rate/ or has features that you don’t currently have in your loan (like allowing extra repayments). AND YOU USE THOSE FEATURES EFFECTIVELY!

An investment loan is usually just as expensive (if not more expensive) than a home loan. You may be thinking of an interest only loan (where you are only required to pay the interest that is calculated on your loan amount) but if you chose one of those loans you are not paying the principal off and hence not decreasing your loan.

For example, if you were to change your current loan to interest only and you had $100,000 still owing then you would only be paying the interest being charged on that $100,000. A year or two down the track if you are still on the interest only facility, then you would still owe $100,000.

In terms of tax benefits, if you decided to rent your property out (making it an investment property) you may receive tax benefits. (Better to ask an accountant than someone like me).

Before making that sort of move though, you may want to find out how much your current property would rent for. Have a chat to a few local real estate agents.

Will the rent cover the mortgage payments and costs involved with the house? eg rates and insurance etc?

Will you need to make up the shortfall between mortgage repayments and rental income as well as a new rental commitment?

Lastly, if you think you would like to fine tune your budgeting process, you may want to have a look at a book AD recommended ‘The Richest Man in Babalon’ – its an easy enjoyable read with some very hand tools on how to manage and reduce debt. Its a handy resouce tool in my library!

The response was a little long winded, and I made an assumption or two about what information you needed, but if I haven’t awnsered your question properly let me know, and I will start the ‘novel’ again.

Cheers, and best wishes

Nathan.