Hi!
I have an investment property which was my PPOR until a couple of years ago when work supplied me with a house to live in. I owe $180,000 on this property and its worth about $300,000. I have a share portfolio of $20,000. In two years time, I intend buying a second property which will become my PPOR. My work covers all Stamp Duty expences and legal fees. I have some spare cash ($10,000) and am wondering if I should buy more shares with it or put it aside – preempting my next property purchase.
Does anyone know if I can use the equity in my first property and shares to buy a second property?
Your advice would be greatly appreciated.
Hi
Sounds like a good job. Yes you can use the equity in the first property to buy the second, and third, and 4th etc.
Also did you know you can continue to claim the first property as your main residence, even though you are not living in it, for up to 6 years and it will be CGT exempt.
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
Thank you for your response and advice.
So should I keep my spare cash or invest it in shares?
Does ownership in the share market help the situation?Whether you shoud invest in shares or not is something you need to work out yourself, but as a guideline do you think you can make more money in shares than interest you would save if you put it on your home loan?
Having shares won't really help you get loans for a property, but shares are easily sold and you can come up with some cash quickly if need be – so can help that way. You also have plenty of equity so you won't need cash to invest in property.
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
Hi Letita,
If I were in your shoes I would look into offset accounts, They help reduce your interest burden on the existing property and are liquid so you can pull the money down for a deposit when ready. They normally yeild the same result as the interest you are paying now. A good mortgage broker can help you withn this and show you how. The banks will hardly ever tell you about this as you can pay off your loan alot faster…..I believe there is a thread on this site re offset accounts.
Like everything, research, research, research……then do some more…research!
Ciao Dj
Duncan youare bang on but remember there are offset accounts and offset accounts.
Richard Taylor | Australia's leading private lender
Wonderful advice everyone, thank you for your assistance!
Hypothetically speaking, if I was to buy another investment property now using the equity I already have, would I just need to service the loan? For Example, if I was to buy a place for $400,000 would I use the equity to obtain the loan and then just make the repayments for the $400,000 I would borrow? I'm just trying to get my head around it and you all gave me the thought that maybe I could be an investment property now and then a PPOR later. Just trying to research and understand!
As for your advice on Offset Accounts… Fantastic advice… am looking into it. I cant believe its a best kept secret!
If you use equity to help purchase, with no cash, then you will have a loan of 100% of 105% (including costs) of the purchase price. You would have a separate loan of this amount and would have to come up with the repayments – but having rental income will help.
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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