Hi guys,
The situation:
My partner and I have put in an offer on a block of land, with the offer yet to be accepted.
If the offer is accepted we were planning on purchasing the land for the later use as a holiday getaway after building a house on it in a few years time.
The purchase was to be with NO mortgage using current savings, a small inheritance of shares, and savings over the next 3 months.
We are leaving our jobs in 5 months time to travel the world for 12 months, and plant to return and gain similar jobs at similar pay rates.
Our dilemma lies in the fact that the current share prices have fallen over the last couple of weeks and to the extent of 10% of the total purchase price of the land, which will mean we will have to use all of our savings for the purchase (if buying with cash) and will only have say up to $2000 left for when we return to australia and begin looking for jobs again.
The question:
1) Do we save and buy the land with cash and current assets, and have little or no cash as a reserve for when we come back to australia after our holiday, or
2) Do we get a small mortgage or personal loan to cover the difference due to the drop in share value at the present, and have around $5000 – $10000 in savings for when we arrive back in australia?
What would you do? [wacko]
It is only your thoughts that create your future – Be careful what you think!
You can always mortgage the land at a later date. Maybe consider these:
– Sell shares now, pay CGT
– Sell shares now, buy proeprty and reborrow for shares = deductible interest
– keep shares and get a margin loan agaist them
etcTerryw
Discover Home Loans
Parramatta
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Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry.
If we decide to keep the shares and obtain a margin loan against them, what sort of ratio can we borrow against them? ( ie 70% 80% of value )
Then, would this interest then be deductable because the loan is against the shares, even though we have used the cash taken from the loan for a private purchase?
And if we choose thisoption, what sort of cash reserve would we need in case of a ‘margin call’?
[blink]
It is only your thoughts that create your future – Be careful what you think!
I think the LVR would depend on the shares. Some shares are considered more stable that others. Probably 70% LVR would be the max, so aim a bit lower, maybe 50% to help you not worry too much about margin calls.
Tax deductibility would depend on the use of the funds, not the security.
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
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