In Steves examples in the 1 – 130 book, he always says “cash needed” mostly 20%. Is this just a term? meaning you can use cash or equity? If you use the equity in one house to finance the deposit on another, that means you still have to finance the whole 100% of the price, doesn’t it? So is it better to use cash, to bring down the cost? or is it better to use equity?
Lea Smith
Hi Lea,
The equity used can be considered a form of cash. If you use 20% equity from a certain property as the deposit for another, then you’ll only need to finance the other 80% of the valued property.
I believe the reason Steve mentions 20% is to avoid Mortgage Insurance.
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Lucifer_auHi Lea,
I prefer to use equity for my deposits as it is ‘easier’ to get – savings are the bits left over after the ATO has rifled your pockets whereas equity can easily be achieved by buying under value, renovations, waiting, buying well or paying off P & I.
I prefer to use my cash in an offset account or for paying down non-deductible debt.
Makes more sense to me – maximise deductible debt and minimise non-deductible debt.
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