HEY THERE [biggrin]
I am finally purchased my first property (23) and I just want to thank everyone for there supprt and comments. I have been a regular user of this site to get advice etc
I purchased it in brisbane on the north side.
My next goal is to pay it off in 5 years
please let me know what I have to do or what the steps, hints are
I earn $2200 per month (after tax)thanks
Hi MC,
Congratulations on the purchase – to be of assistance we may need the outstanding loan amount and possibly the purchase price to be of assistance.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi MC,
Thanks for the figures – I’ll post them here so others can have a crack at some alternatives too.
Loan amount = $184K & value = $214K
I used one of those web based calculators and an interest rate of 6.8%. On aloan of this size would require fortnightly repayments of ~$1670 in order for the loan to paid out in that time frame. Given you are ‘only’ earning $2200/clear per month this means that something a little more creative is required.
Either that or the timeline you have set yourself is not feasible.
In a nutshell the only way to pay a loan out quickly is to make additional repayments. This leaves you with the option of a second job or a new timeline as I see it, but then I am a middle aged conservative type of person.
I am sure the more creative amongst us will come up with something useful.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958Why do you wish to pay it off so fast?
There may well be another boom in 5-7 years as history might suggest.
If you were to control (not own) 2 or 3 IPs that go up by 50% then surely this is better than one paid off IP?
Not advice – just food for thought.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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’d agree with Simon, I’m not in any hurry to pay off my IP’s at the moment, where’s the benefit in paying off principle when the additional funds can be better leveraged?
you can also look at the Credit Card LOC type loans to rapidly reduce loans but this takes disclipine…
read Anita BELLs books??
Plus at the moment i’m achieving great CG (I’m betting Derek is as well)
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorWell done with the purchase and many more happy buys. Just out of curiosity are you living in this place. if not I wouldn’t be in a hurry to pay it off too quickly. If it is paid off most of the rental income will be subject to tax. I think a good situation for a rental property is to have it positively geared but not so positively gerared that your paying to much tax. Remember if property doubles every 10 years then your 200K property today will be worth 400K in 2016 you would have made 200K in capital gain (20K/year) you will have this money to borrow against for more property and so long as you don’t sell you won’t pay any tax. The more tax you save the more money you have to invest. If however you are living in the property ignore what I have just said and pump as much cash into the sucker as quickly as you can.
We buy houses in Adelaide. No Agent Fees
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0431 757 161G’day . Congrats on your purchase, I hope it is the first of many!!
I am now 24. I bought my first appartment when i was 19, and it has been paid off.
But…..
It wasnt easy!! I was quite tight on the old wallet for awhile( i still am!!) I had a big reive of my monthly cash intake, and automatically cut out all those comforts. I gave up going out spending alot of money on things that A, i did not need, B gave me a headache the next day, etc etc.
I straight away doubled my payments, per fortnight. then every other week I used my deposit book and made another payment, thus paying weekly. at the end of every month if I had money spare, I would keep about 50bucks, then put the rest on the mortgage, as an additional payment..
Go back and live with your folks, or get a mate to share.I hope this helps, it is worth it in the end. once you have that first bit of capital up your sleeve.
good luck,
regards,
Scroodge!!Jason
JASE
Following on from Simon, if you really want to pay it off quickly, maybe you could buy two and sell one in 5 years, using the proceeds to pay off the remaining loan.
Terryw
Discover Home Loans
Parramatta
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Originally posted by Dr Y:If however you are living in the property ignore what I have just said and pump as much cash into the sucker as quickly as you can.
Agreed but ONLY if you plan to live in this property until you die or sell it when you wish to move on.
If there is any chance of you renting this place out at any stage then do not pay any more than interest. To achieve the same effect pump as much money into an offset as you can which is virtually the same as paying it off.
The advantage is that the funds can be used for a new PPOR leaving the original loan fully deductible.
AND NO redraw is not the same thing!
All the best,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
A way of earning more income is to rent the 2nd or 3rd bedroom if that is possible. I have always had my flatmates pay my mortgage for me.
I would suggest you repay as much as possible, possibly get a second job if your extra keen (keep in mind extra tax you pay on a 2nd job sometimes it is not worthwhile). In 5 years you will have a great deal of equity which you can use to purchased another property, in fact if you repay as much as possible you will be on your way to a 2nd property in no time.
Cheers
Jeff Aquilina
Need a holiday? http://www.coralsearesort.com email [email protected]
Morning Everyone,
Thanks heaps for all ur thoughts, suggestions.I guess I was just mad keen to have it paid off in a small number of years, but if I put everything I have into the property + rent I will receive when someone goes in there. I will use the equity after about 5 years to buy something else.
It is just funny when people say that put ‘extra’ repayments in there.
I mean all I have is my wage so what do they mean by extra repayments? apart from getting money from shares, family, lotto (how lucky is that!) do they mean, after paying the minimum one week they may decided to live offf baked beans for a week and pay another couple of hundred? is this what they mean?
as most people would be trying to big repayments all the time, except for maybe families.thoughts?
Hi MC,
As you can see there are some options available to you.
At the end of the day the best course of action will be determined by your long term plans. If these haven’t been planned (even broadly at this stage) then you may end up misdirecting some of your available funds and efforts.
If this property could become a rental at some stage in the future then consider pumping as much as you can into an offset account so that you can use these funds elsewhere later.
Sure there are some people who live on bread and water for as long as they have a mortgage – their need to pay it off governs every waking minute and consumes all the spare cash and enormous sacrifices are made.
Sometimes a more conservative repayment approach is warranted and when equity and funds are available additional investments purchased – this approach actually increases an individuals net worth.
Ultimately you need to have some direction in your investment (property?) plans so that the decisions become self evident along the way.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958Originally posted by mcubed:It is just funny when people say that put ‘extra’ repayments in there.
I mean all I have is my wage so what do they mean by extra repayments? apart from getting money from shares, family, lotto (how lucky is that!) do they mean, after paying the minimum one week they may decided to live offf baked beans for a week and pay another couple of hundred?I don’t understand why anybody would purchase a property if they could only afford the minimum repayments. Borrowing a little less and putting the difference into repaying additional capital would see them quids & years ahead in next to no time. Plug a couple of example figures into an online mortgage calculator and the point will become very clear.
Cheers, F.
I don’t understand why anybody would purchase a property if they could only afford the minimum repayments. Borrowing a little less and putting the difference into repaying additional capital would see them quids & years ahead in next to no time. Plug a couple of example figures into an online mortgage calculator and the point will become very clear.Often lower income people are at their limits when they purchase property and can only make minimum payments. Think about people who have finished school or just scraped together a deposit and are getting into property. Most first home owners are in this situation.
I remember when i bought my first house and although we were able to pay more than minimum it wasn’t that much more. But, income goes up every year and we now earn a lot more and can make much bigger payments. But, if we had waited to get into the market until our income went up and we could afford more, we wouldn’t have the capital gains that we do.
There are positive to scraping your money together and making minimum payments. Over time your payments will become larger and larger and your mortgage will start to shrink.
Nats,
I understand your point, but would suggest that:
a) This only applies to the very few house buyers to whom repayments on the cheapest house are stretching their ability to live comfortably (and these people really would be better off in almost all scenarios – particularly at the tail end of a boom – renting and saving the difference between rent & mortgage repayments).
b) Most people’s potential earnings will rise proportionally faster than house price affordability falls. This has been the case historically with the exception of a couple of bubble-frenzies and is almost certain to be the case in the future.An example of my point from a previous thread:
I would suggest you give serious consideration to the price you are prepared to pay for a PPOR. The difference between buying something cheaper and paying it off over 10-15 years and stretching until you can’t afford to make significant additional payments over 30 years is enormous.For example 2 couples, both with a maximum weekly accomodation budget of $320 are buying PPORs. The first couple buys:
$150k over 15 years
$312 p/w repayment
$93,000 total interest paymentsThe second couple buys:
$205k over 30 years
$317 p/w repayment
$289,000 total interest payments
both scenarios assume constant 7.07% IR.After 15 years the first couple have finished paying off their PPOR and start saving or investing their $312p/w.
After 30 years, the second couple has paid off their house, spending a total of $494k.
Meanwhile the first couple have paid off their house for $243k and also invested a further $243k (or at 6% compounding, $395k).Which would you rather be?
Cheers, F.[cowboy2]
Hi Foundation,
In your analysis you haven’t told us how much the houses are worth after 30 years.
Does the couple paying off their loan over 30 years win because their house is worth more than the 15 year couple’s house and their investments? And don’t forget the 15 year couple will pay tax on their investment income.
Regards,
DIY Investing
Discounted Financial Products
http://www.diyinvesting.com.auFoundation,
as DIY says,
if assuming at the end of 30 years and assuming that property doubles every 10 years
couple 1 now own
House $1,200,000
Cash $ 350,000 (assume they paid 30% on interest income)
Total $1,550,000couple 2 own
House 1,640,000And remember in the scenario, there was no pain for couple 2’s gain, because they both had the same budget.
If however a 3rd couple decided so suffer in the short term and commit themselves to an extra 50 per weeks (over 30 yrs) they could afford a place worth 235,000 which will be worth $1,880,000 at the end. Less of course the additional $78,000 they paid in interest, they are still well in front. The short term pain, can pay off.
Mal
Getting out of your comfort zone, can help you become comfortable
Really, when you think about it, the only way to pay a loan off quicker is to make extra repayments. There are no secret techniques. Just pay more, quicker and you will get there.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.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
Ah yes, the power of compound interest…
Yes, if an asset returns a greater rate of capital growth than the interest rate on borrowings, of course you’re going to be best off to leverage yourself to the gills to get as much of that asset as you can.
Good luck with that then, a capital idea. I’m well put in my place!
F.[cowboy2]
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