I would have a question for you all and would love your thoughts on it.
I currently have an IP in Darwin negative geared but positive cashflow of around 54 dollars a week.
to set this up i borrowed against my owners equity (36k) at interest only i owe 209 per month on it.
I have 56k in savings when i resigned from the navy just recently.
my question is this
1. should i move out of my own place and rent giving me positive cashflow after tax of 183 per month.
2. stay where i am and just pay the 209 a month (cheaper than renting)
0r
3. pay out the existing loan of 36k (which has only just been set up) and stay where i am?
your thoughts on this would be greatly appreciated
thanksHi Shaun,
This is really tricky to respond to without knowing your other plans and details but as for paying off the 36K loan – do you think you could do better than $209/month + break costs by investing this money elsewhere? What interest rate are you paying over what term?
It’s probably worth it because it’s a guaranteed return, depends on break fee penalties and whether that leaves you living off a credit card etc. Good luck.
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Mel
[email protected]Thanks for that Mel,
I will fill you in on a few more details.
I intend on buying more property +ve geared to counter the IP in darwin.
At no time do i intend living off a credit card as i am currently employed and saving every cent towards the next property.
I think the problem i have is, to make the 183 a month positive cashflow, My savings will be reduced by paying rent.
as for the 209 a month
its at 7.54 fixed for 2 years then reduces to variableNot enough info for specific plans to be suggested.
Do you want to stay where you are?
An idea is to pay out your PPOR debt then redraw funds to use as deposits for subsequent properties. 7.54% is not a nice interest rate and you should ascertain the break costs of paying it out compared to what you will save if you take a new loan at under 6% which is what we are writing at the moment for variable loans.
This makes all debts tax effective.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I dont really care where i live at this moment, I would be happy to live in a cardboard box if i could get away with it!
I am assuming PPOR is purchase property (is the one i live in)
to pay it out would leave me with little savings to purchase another IP and i was thinking with a couple of IP +ve cashflow, i could easily pay out the owners equity debt in 2 years time (when it reverts to 6% variable)Shaun,
PPOR = Principal Place of Residence = Your home.
If you pay out the entire debt now you can then draw against the PPOR to buy the next one.
This is more tax effective. Please feel free to give me a call and I will be happy to explain it to you. I sometimes struggle to get my points accross by typing!
Cheers
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
will get back to you once i sort this out with the mortgage broker i went through. It was my understanding that i could pay this 36k out and then use redraw facilities. will let you know.
If (as i suspect) she has loaned me too much money then i wont care about the cost of paying it out as i dont want to have people handling my money that i have to triple check their work.
will let you knowDisregard, I have spoken to the bank manager and i do have a redraw facility. The reason for such high % rate is due that i have to pay mortgage insurance for 2 years before they will set me up as a professional investor.
Thanks to everyone who answered my questions. I guess i just got confused with all the numbers i had.Shaun
I don’t understand what you mean by having to pay mortgage insurance for 2 years. I think you have mixed something up, mortgage insurance is only a one off fee upfront. Maybe you are on a low doc loan that reduces after 2 years (of repaying on time)?
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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