We are a family of four. Have paid off our current home, and I am 2 years away from being introduced to the private school sector for my oldest son. I have a good deposit saved away.. I need to know.. if I should put the money into housing.. or keep it aside for the school fees.. Is there anywhere on this site where someone has provided a calculator of when a house purchase is made in Australia – to show the expenses incurred when selling and purchasing an investment property.. Thanks in advance
Hi Komanos,
In your situation it is not an ‘either or’ situation. You can do both.
Set up a line of credit secured against your home and use these funds to pay for the deposit plus purchasing costs. You will need total loan of around 105% of the property – 25% comes from your line of credit and the balance from separate loan.
You can also put your current savings in an offset account – linked to either of the above loans and then in 2 years time take the money and pay the school fees. As an alternative these funds could be placed in a redraw loan account to do a similar job and then used to pay the school fees at the appropriate time.
A stamp duty calculator is available at http://www.realestate.com.au/cgi-bin/rsearch?a=loan&t=res
Hope this helps.
Derek
Derek is spot on.
I think you believe that you need to pay out your property and then save for the deposit on the next one.
If you use an offset or redraw make sure that the funds go against your home loan. Also borrow 100%+ of your IP to maximise deductible interest and use your savings to offset the home loan.
You are in a great position to build a portfolio of investments if you feel that is the right path for you.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
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.
Try this calculator
http://www.national.com.au/Personal_Finance/Calculators/hlspcc/hlspcc.php?page=bothJames
Derek,
Thanks for your reply..
could you please spell out what you mean when you say “..Set up a line of credit secured against your home and use these funds to pay for the deposit plus purchasing costs. You will need total loan of around 105% of the property – 25% comes from your line of credit and the balance from separate loan”.. I think I know what you mean h/ever , if you reply it will make better sense to me..” Thanks to allHi Konmanos,
Long weekend over here hence the delay.
“Line of credit secured against your home”
When banks consider lending someone money they apply two main checks – a serviceability check (your ability to meet payents) and a security check (can their money be reclaimed should you be in default)
Typically banks will lend you 80% (with Lender mortgage insurance higher than this) secured against a suitable asset – houses.
By way of example assume your house is valued at $200K – a bank will lend you $160K. This could be set up as an line of credit or equity loan whereby you only pay interest on the amounts drawn.
These funds can then be used to provide the ‘deposit and purchasing costs’ for other investment properties.
Further extending the example. You want to buy an investment property for $150K. You write a cheque for $30K deposit (and borrow the remaining $120K) and other cheques totalling $7500 to cover stamp duties, solicitors fees etc.
Hope the explanation is clear enough.
Derek
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