Hey all,
I would really appreciate some help as im really struggling.
I'm 27 and currently earning $50,000 PA.
I currently own an investment property in Gracemere (Rockhampton). It is valued at roughly $300,000. I owe $125,000 on the loan for this. Repayments are $808 per month (P+I) and rental income is about $1000 (after commission).
I think its time to do something else but not sure which option is best.
1/ Keep the property in Gracemere and invest in another investment property.
2/ Sell Gracemere and use the money to buy a house or unit to live in in Sydney
Ideally i would keep Gracemere and buy a unit on the beaches but my income doesn't allow for this (bank will only loan $320,000)
Bearing in mind that if i go with option #1 i will also have to rent a house to live in.
My main goal is i would like to own a house on the Norther Beaches in roughly 5 years time.
Any help would be greatly appreciated.
Dan
First thing to do would be to change that loan to interest only and keep spare money in an offset account. By paying down the loan you are creating adverse tax consequences for yourself.
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
thanks terry,
that shows how much i know. Ive been paying off as much as i can because i thought it would be best to pay less interest.
It is good, but you could do it betterby using the offset. You will still save the same interest but tax consequences are better.
eg. imagine you pay $100,000 extra off the investment. That means you have $100,000 less available for the home to live in.
at 5%pa that is $5,000 less interest on the investment. that is $5,000 less you can claim pa.
If you had claimed this $5,000 you could save $1000 in tax – eg at 20%.
This is each year and may be even more if you pay a higher rate of tax.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
With that amount of equity there is a lot options available so if your own current Bank doesnt offer you what you want I would be getting your Broker to try another lender.
However in the meantime as Terry has mentioned it is probably more important to restructure the current loan to maximise your savings. Interest only with 100% offset is the way to go until you have a new non deductible loan.
Richard Taylor | Australia's leading private lender
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