hi guys
i was just wondering if any one could give me some insight as to the best way to save a deposit. my husband and i are adding the finishing touches on our finance for our first PPOR a 2 bedroom unit witch we intend on using as an IP in the next 12-24 months.
my question is this is it more effective to create a morgage off set account and put our savings in there to reduce the interest and then redraw some of it out when the time comes to use it again?
or just put it in the banks saving account?
i'm trying to plan/guide for the future and am not sure of goods ways to save and get the most out of my money while i save.
any advise or ideas would be appreciated.
ps im not ready to talk to an account just yet as im trying to work out were i want to be and how im going to get the.
Aimee
Clearly the preferred way to go forward is a simple interest only loan on your PPOR with a 100% offset Account.
If the property will be negatively geared then ensure that the PPOR is held as though you were buying a IP from the start.
If you want to hold the property as Tenants in Common with an apportionment of the shares then ensure the Transfer document is adjusted accordingly.
If you adjust the ownership details down the track then this could trigger both a stamp duty and CGT liability.
Richard Taylor | Australia's leading private lender
Hi Aimee
It depends how disciplined you are. A 100% offset account is fantastic if you are financially disciplined but disastrous if you are not. My husband and I were not disciplined and the offset account was of no benefit to us. The best way for us to save money initially was through enforced saving, that is, to pay money straight out of our pay packets into the mortgage, pay full health insurance and get the 30% rebate at the end of the year, etc.
You just need to work out what will work best for you.
Cheers
K
Problem is in doing that Linar you are unable to redraw the excess payments down the track and claim them the interest as a tax deduction.
Richard Taylor | Australia's leading private lender
That is true, but if you aren't any good at budgeting (and we weren't) then it was by far the best way to save. We would have missed out on claiming a very small amount of interest as a tax deduction (had it been an IP and not a PPOR) but when it came time to have the place revalued and refinanced, we had a lot more equity to use. Mind you, that was in the days before we knew anything about property investing and the equity was used to buy a 1974 MGB Convertible .. which is another post entirely.
Cheers
K
QLD007 you said
Clearly the preferred way to go forward is a simple interest only loan on your PPOR with a 100% offset Account.If the property will be negatively geared then ensure that the PPOR is held as though you were buying a IP from the start.
If you want to hold the property as Tenants in Common with an apportionment of the shares then ensure the Transfer document is adjusted accordingly.
If you adjust the ownership details down the track then this could trigger both a stamp duty and CGT liability.
please expand on what you mean by tenants in common bit? and the transfer docs?
if i buy under the term that it be my PPOR and move out after 12months i have to change something to become tenant occupied so that i claim it on tax as an IP? and i pay more stamp duty??????
i'll be paying stamp duty upfront for this property wont i?
we intend to find a property as close to being cashflow positive as possible but i have a feeling i may have to learn how to make it postive in one of steves books he pions out to pay principle and interest on the loan but im confused as which road to go down as i know the benifits to both sides. by paying of the princible i can slowly (omong other things) make the property positive but if i only pay interest then i have that money freed up so that i can use on other investments.
i want some where to put investment saving purley for the only purpose of reinvesting it and have no problems only using it for that purpose os an off set account would be viable in my position?
Aimee
There are two ways a property can be purchased:
1) As Joint Tenants which is a type of joint ownership of property where ownership passes by survivorship. On the death of one joint tenant the property held as joint tenants automatically passes to the surviving owner of the property and not by their will.
2) As Tenants in Common which is the other way of holding property. The property owned by a tenant in common is preserved on death and goes to the estate of that tenant in common.
When you purchase the property you decide which way you wish to hold the Asset and this is shown on the Property Transfer form. If buying as Tenants in Common then out of the 100% shares of ownership you split the ownership according to your own situation. This could be 50 / 50 or 99 /1.
Assume the property is purchased jointly with a spouse and one of you is on 100K per annum and the other party not working.
Whilst initially the property will be held as your PPOR it will eventually be an IP where you may wish to maximise your Tax deductions.If you bought it jointly then 50% of any loss would be added to one of the parties income and their marginal tax rate would be fairy low. If however the deductions where claimed by the party who was paying 42 cents in the dollar then this would result in a higher tax deduction easing cash flow.
If you decided to change the ownership structure when you rent the property out then you will incur additional stamp duty and if the transfer was done after a 6 year from the date you vacated then CGT would be payable.
Simple lesson is get it right from the start.
Richard Taylor | Australia's leading private lender
thanks richard i'll definetly have to put this to a finance broker before i settle on a property.
would a silicitor know about this or is that entirley different kettle of fish???
Solicitor would do the Transfer document but will only do as you tell him.
Your mortgage broker would be able to structure the loan for you.
Drop me a line if you need a hand to make sure you have the right split up given any variabnce in marginal tax rates.
Richard Taylor | Australia's leading private lender
thanks i will
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