How long should I wait to purchase another property?

Hi Blissy, welcome to the forum.  Congratulations on your engagement! Sounds like your  first IP is working our well. Good choice, hard to beat a  family house in a solid area with long term tenants  Have you had a Depreciation Schedule done yet? (worthwhile regardless of the the age of the property, cost about $400 ish)
You didn't mention  other debt / children / credit cards etc. If they weren't an issue then it would be worth while talking to a Mortgage Broker to discuss your next move. My MB lives in your area if you need one. PM off line for details. Good luck.

Hi Blissy, text me on 0410713170 and I'll give the details to you. Thanks

Hi Blissy a redraw account and offset account are very different things. I know that both Richard and Terry have explained the difference between the two a n umber of times on this forum, so I won't attempt to. But if you check the other posts in the financing sections you will probably get all the info that you need.  Cheers Sonya

Hey Blissy, it is great to get you over here. Congratulations for your engagement. I think you got your investment property in a great value. I hope it is going well. You can surely get into another property with your Fiancee. There is nothing to worry about. Keep it up.

Whoa! beware of paying money into a investment loan and redrawing it.

Pretty soon none of the interest will be deductible, but you will still have a large debt. Its a tax time bomb!

To understand why you will need to know a bit about the ATO’s tax treatment of loans.

Just remember:

Every time you pay money into a loan this is a deposit.

Every time you withdraw from a loan this is considered new borrowings.

Deductibility of interest depends on what the funds borrowed were used for.

So, say you had a $100,000 loan for an investment property. Generally the interest on the whole amount borrowed to purchase the investment property will be deductible.

Say you set up your loan with the idea of saving interest and you had arranged for your monthly salary to go straight into the loan. This will save you interest as your balance will immediately decrease.

So you had your $5000 wage deposited into the loan account. The new balance is $95,000.

The next day you take out $4,000 to buy groceries and for living expenses. The ATO will consider this to be new borrowings. The interest on this $4,000 will only be deductible if the funds were used for investment or business purposes. In this case it won’t be because the expenses purchased were of a private or personal nature.

Now you have a $99,000 loan, but only the interest on $95,000 is deductible with interest on $4,000 not deductible.

This is just the first month.

You then do it again and again. Assuming you were paying the interest separately and in addition to the wage being deposited you will have paid the tax deductible loan off in 20 months, but you will still have a non-deductible loan outstanding of $80,000.

A way to have avoided this and still have saved the same interest without the tax complications would have been to use a loan with a 100% offset account attached. All money, savings, wages, rents etc should have gone into this account. This would save the same in interest as if you had paid it into the loan.

Hi Blissy

I think Richard may have been talking about the next loan there.

For this one I would suggest you ring St George and say you wish to change over to IO and set up a 100% offset attached. Sounds like you may not be on the professional package and you may be on their cheap loan – the basic maybe? The offset account is only available on the stndard variable loan which is a higher rate, but you do get a discount which will bring it down to similar or less than what you are paying now, but you will get all the added features such as a free variaition per year. So ask about the package.

Even if it costs you I suggest that it is worth doing as otherwise you will be digging yourself in deeper the way you have set it up and it will save you money in the long run if you change now.

You can never paid all the interest!

Hi again Blissy

Firstly congrats on the news of your new arrival.

From those numbers i think your equity is fairly limited so might be a matter of using some of your cash / managed funds and looking at a 90-95% lvr.

Not cheap when it comes to the associated costs but gets you miving forward.

i am assuming you havent considered buy a PPOR and claiming the FHOG ?

Hi Talis

Yes you have it.

It will save you considerable issues down the track.