Invetsment Advice

Viewing 4 posts - 1 through 4 (of 4 total)

eussias
Member
@eussias
Join Date: 2007
Post Count: 2
August 8, 2007 - 3:15 am
Hi,
I'm relatively new to all this and would like some thoughts from people about something.
My partner and I currently own 2 properties – we live in one and rent out the other. The mortgage repayments are almost covered on the rental property by rent and we also add extra each month to our second mortgage. For a long time I had the mindset to pay off one mortgage first before investing again but I am now looking at getting a reasonable deposit together and looking to purchase another investment property.
Can anyone give me some advice about the pro's and con's of this idea? Thanks in advance.
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
August 8, 2007 - 5:16 am
Personally I would never be paying down a investment property loan whilst i still had a debt on my PPOR.
Suggest you restructure and convert the IP loan to interest only and the PPOR to P & I or IO with a 100% offset. By paying off your PPOR debt quicker this will not restrict your ability to borrow for your next IP.
Might want to avoid Cross collataralising the loan though as this will cause you problems in the future.
Richard Taylor | Australia's leading private lender
eussias
Member
@eussias
Join Date: 2007
Post Count: 2
August 9, 2007 - 3:41 am
Hi RIchard,
Thanks for the advice – greatly appreciated. I have been contemplating putting the IP loan to interest only for a while – need to actively do it now!! Sorry for my ignorance, but could you explain in laymens terms cross collataralising? Thanks.
L.A Aussie
Member
@l.a-aussie
Join Date: 2006
Post Count: 1,488
August 9, 2007 - 4:44 am
Yep,
make the I.P interest only and pay the minimum interest each month, and pay the PPoR mortgage off as fast as you can.
The I.P interest is tax deductible but the PPoR interest isn't so it has to go.
Another option is to move out of the PPoR, use it as an I.P. This way the mortgage interest becomes tax deductible.
It means you will have to rent somewhere else yourselves of course.
The benefit of this is there are no purchase costs for the new I.P as you already own it (as your PPoR), no new loan so no bank fees, and if you still have a sizeable mortgage on the PPoR, you may find it is cheaper for you to rent than to keep living in the PPoR, PLUS you get the lovely tax deductions that go with the I.P.
Many people won't do this option however, as they are too emotionally attached to their PPoR, but if you can get past that, you may find your wealth accelerating more quickly.