Hi everyone,
After many, many, attempts asking Google to answer my questions most times i have been directed to this fantastic site.
So tonight i bite the bullet and sign up to become part of this fantastic community.So allow me to introduce myself, i am 26, my partner and i purchased a investment property (IP right?) at the start of
2008 for $245K at 9%, rented at 235 pw, we got it down to $115k and just bought another house for $235K @ 5.5% because we simply cannot live with our parents any longer so that will be our primary place of residence (PPOR)?. We haven't settled yet. We got the 17K first home buyers on the second home which is covering all the legals and stamp duty. SO now effectively we will have two mortgages: 115k on an IP and 235k on a PPOR. Unusually owing more on the PPOR as we did things backwards.Now i understand it is best to pay of the PPOR as quickly as possible because there are no tax breaks, our plan is to put my entire wage of 45k per year to the PPOR and live of my partners wage, she may even put some money to the IP (good/bad idea?) although the rent will pay that off. Now this is what i am not sure about… the PPOR which we move in next month is certainly not a dream home and more of a stepping stone, so the quicker we are out of it and into something nicer (probably going to need 500k) the better, so do we pay of the PPOR just as quick, as in pay it off say in 5 years, when is a good time to then rent that out (and having two rental properties) and move on to bigger and better things? should we not pay it off entirely to get the tax benefits when we move out of it? and how would we go about borrowing MORE money!?
I just need to have a bit of a plan and some focus
Thanks guys this site rocks!
Carl.
welcome
and congrats on getting a PPOR! only the interest segment of your mortgage payments for your IP are tax deductable. so its best to have that loan as an interest only payments and just pay your minimum amount.
make sure your PPOR loan has an offset facility. Which means that while you are paying only the minimum repayments onto your loan, you have a stash of cash sitting in another account which is cutting down your interest you pay each month. and put every spare cent into that account because while u live in your PPOR your interest isnt tax deductable.
if at any time you choose to move into a different PPOR and use your current one as an IP you will then have this wonderful collection of $ you can then take out of your offset account and use it as your deposit.
at that time you will then have 3 properties: two IPs that have interest only minimum repayments, and a PPOR with an offset facility where you put all your savings.
does that make sense? this is the first time im offering advice on this forum
normally im the one asking for it. so its odd! im sure others will post their opinions as well.good luck!!!
Hi Carl
Firstly welcome to the forum and I hope you enjoy your time with us.
Yes in an ideal world you would not have repaid all of the principal on your current IP loan especially where you have now non deductable debt.
In saying that as you mentioned this property is merely a stepping stone and therefore i think i would structuring the loans differently. It sounds to me like the loan for the PPOR was secured against the IP and therefore cross collateralised which again could come back to bit you in the end.
Might just mean a little of tweaking the loans and restructuring them so that the work for you and not the lender.
Without a lot more of the hard data difficult to provide some structured advice.
Richard Taylor | Australia's leading private lender
Thanks Karen and Richard,
SO in a nutshell Karen you are saying put all our money into an offset account on the PPOR and use that in five years as a deposit to borrow and buy our dream property. In any case never owning the two IP. Are the tax benefits that good that if you, for example own two houses outright i could use the rent of those to pay off a third house, seems that no one digs this option.
Richard, thank you for your reply also – very much appreciated. Yes you could say we cross collateralised, in that we borrowed the entire amount of the PPOR from the same bank because we had already paid off 130K off our IP and it has also gone up about 20k. So i was wondering what you mean by it biting us down the track? Is there any thing else i could let you know so that you are able to add any other thoughts to my plan as you say "some structured advice" and what tweaking may be possible and why i would i do such? I know i am asking a lot but i am very very grateful for any feedback you can provide. Thanks heaps, little bit over my head but i need to know this stuff, again Thank you kindly.
Cheers,
Carl.
and congrats on getting a PPOR! 
normally im the one asking for it. so its odd! im sure others will post their opinions as well.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
