Hello everyone! I just finished Steve’s book and I dare say I felt really pumped up to go get started.
Then I looked at my current financial standing. I kinda felt very down since my situation does not fit with the solutions that was highlighted with the book.
Currently, I have a one year old mortgage of $388,000. Its safe to say we don’t have enough equity yet. I have $7500.00 of advance repayments/savings in our loan. My wife and I are both working full time earning ok money but we really want to get started. Though obviously not enough for deposit and closing costs.
What would be the best strategy? Should I just put in all savings to my mortgage as advance repayments and access it in say 2 years time (wow what opportunity costs would i loose!) to be used as a deposit? Right now we put in almost $200 a fortnight in advance repayments since based on what i have read its best to put as much advance repayments as you can to minimise interest repayments and eat out on the prinicipal. Or is it better to put the money on a managed fund for quicker growth.
I just want to address my lack of cash for deposit and closing costs. I have started in researching possible deals but my drawback is that I have very little liquidity and is being held back by the thought of finding the right property without funds.[confused2]
Thanks a lot!
My advice is be patient.
Pay as much off your mortgage as possible. I dont believe property prices are going to go up much over the next 2-3 yrs anyway.
Then as you pay down your mortgage and the bank allows you to borrow, buy an investment property with growth potential on an interest only loan so you can still pump as much money as possible onto your PPOR loan.
I would not worry about managed funds. Thats what super is for.
AJ
First things first. You make the assumption that you do not have enough equity in your current home loan have you had a mortgage broker run over the figures for you.
Assuming you took out a high lvr loan a year ago the equity may have increased with a combination of an increase in your place and the reduction in the loan amount.
Secondly remember 100% + loans are available for investment property purchases and you maybe slightly suprised when you actually look at the figures.
I have introduced clients to several postively geared properties over the last couple of months where they have been making a suplus on the IP and used this to repay their PPOR quicker.
If you deposit funds into your mortgage and then redraw it you will not be able to claim the interest on this money so it would better to direct the suplus funds into a 100% offset account.
Deposit your salary, rent and any other income into this account. At 7% Tax Free you effectively receiving around 10% if your marginal rate of Tax is 30% and more if you are in the higher brackets.
Look at a Trust set up for your IP to give you more flexibility and Tax saving and channel those dollars into your correctly established PPOR.
Richard Taylor
Residential & Commercial Finance Broker
**Lodoc Commercial loans from 7.39%**
Licensed Financial Planner
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
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