Hi all,
I have been reading about investing in property and one of the questions I have is “When do we start?”. My wife and I bought our first home 1 year ago for 300k (valued at 300k) with a 40k deposit. We currently owe 247k on the house.
Given the above figures and our joint income of approx 90-100k, how much of our loan would we need to have paid off before we can start.
This time next year, we will owe 230k and hopfully a bit more value.
We haven’t had our property valued, so I’m not sure of current value.Any comments appreciated [biggrin]
Sounds like you are paying a bit of extra off your home each year to be reducing the equity by that much. If that is the case keep going and depending on how much your house is worth in a year you will have at least $70k. Banks may let you redraw to 80% value of your home which is $240k so theoroletically you could borrow back $10k to invest on your projected figures. The other way to do it is not pay extra off the house and save for deposit on another one. All depends on your strategy. Get that clear and you’ll know what to do!
Welcome agaperob.
I don’t know exactly if you are paying extra payments into your existing PPOR loan, but if you are then are you paying them directly into the loan or placing them in a 100% offset account.
If you don’t have one of these 100% offset accounts, try to set one up. They work like a normal savings account, except the money that is in it get taken off your loan amount.E.g. you have a loan of 247K(currently). But say you had 10K in the offset account then you would only be paying interest on 237K(247-10) so its the same in that regard but the big thing is that you can easily take the money out of the offset account, just like a normal withdrawal(maybe not at ATMs though).
If you pay it off the loan directly then the only way to get your money back to be used for deposits is the redraw which may not be possible or may attract fees which can be quite substantial.So thats the first thing to do if its not already done.
Your combined income seems quite good(if you’ve been in those jobs for over 12months each then that will help you acheiving finance).
Even if you only had 10K(like what cbellesini said) then that would be alright. You could buy in the 200-250K range or so and use the 10K, i know its 5% not 10%. But like in Steve’s book you don’t need all that much to have as a deposit. If you haven’t read Steve’s books I highly recommend them. I have finished the first one and onto the second one. They are the best resources out, I reckon.
I’ve read about 15 IP books and all of them focus on negative gearing but his cashflow positive approach seems to kill them all. Great stuff.Also even if you haven’t got the relevant cash at hand and won’t invest for a little while till you save up a bit, you can still look around and visit properties, get the general feel for everything.
Hope that helped, sorry if it was a bit long.
Regards Christopher Fife.Thanks for the replies fellas [biggrin]
Yeah, we do have a 100% offset redraw account (RB), but i’ve only been using it to hold our salaries while we spend on credit card (not for savings). We’ve been paying extra straight off the lone account. We have redraw facility, so I wasn’t too concerned about that.
So, does that mean if we’re $8k ahead on payments now + another $10k ahead by this time next year, that next year would be a good time to invest in our first IP with $18k deposit (depending on our equity)? or sooner?
I havent read Steve’s books, I just ordered one [thumbsupanim]you need to find out what your PPOR is worth.
Get 3 real estate agents around to give you an idea of how much you could get if you sold.
Now the price by them may be inflated, but the advice is free, whereas a valuer would cost.
go to realestate.com.au and look at Sales – find comparables for you area and house. That will also help.
Depending on whether you want to borrow 80 or 90% on your PPOR will give you an idea of how much cash you could pull out, and then add that to the cash you have in the offset account.
Now you have a real idea of what deposit you have.
After reading steves book, and I hope others, and this form, determine what your goals are, and then make the decision yourself on what you want to do.
Our goals, stategies, and thoughts on the marketplace can be different, and therefore nobody can determine what you should do.
Regards
JohnInspired Finance
(02) 9944 7776
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