Hi Guys,
I’ve been trawling this forum for a while now want to thank all you guys for posting so much info as I have definitely learnt a lot from it!
I have a question about the whole IO vs. IP debate and haven’t found anything in previous posts that are similar to my circumstances (or maybe I’m just bad at searching) and is hoping someone can point me to the right direction to give me something to think about and motivate me to savee like crazy before heading to a mortgage broker…
I noticed that many of you have mentioned that and IO + 100% offset account loan structure is probably the best option for someone who’s looking to buy IPs but may not be the best option for someone buying a PPOR?
The boyfriend and I are both fresh out of uni and estimated that we can (hopefully) accumulate ~$80k in savings by end of next year if we become total recluses haha
We are hoping to:
– Purchase a cheapish 2br unit in Sydney in about 1.5 year’s time in the local area for ~$250-300k MAX
– One of us will live in it for 6mths to qualify for FHOG + CGT exemption
– Renting it out after 6months for maybe 1-2 years
– We plan to get married then and either move back in/sell/buy new place depending on how our finances work out later on.
Would an IO + offset account loan structure still be suitable even if the property may only be classified as an "IP" for a short period? is there an easy(ish) mathematical way to estimate the difference between the 2??
Thanks in advance people
Mathematically, it works out the same as either way, you have money sitting off a mortgage. Where it matters is what you do with that money, and the tax treatment of that.
I'd stick with the Offset account as it gives you the greatest amount of flexibility. Most loans that we've set up for clients have both offset and redraw, so if you need to put money into the loan, then you can move it from the offset to the loan, and then draw it back out again.
Keep your flexibility high, that way, when you are making changes to your investments and/or lifestyle, you're not restricted on what you can do.
It's only a short reply, but I hope it helps a little!FS
hi
Do you mean the IO / PI debate???
I would never recommend a PI loan – except in one situation and this is if you are a spender and will blow money easily. Otherwise the IO + offset is the way to go for tax reasons mainly. You can always pay extra into the loan if you wanted to too.
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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