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Hi Ninh
One goal we have with our investing is to accelerate our payments into our offset account for our PPOR using all money coming in from our investments. That is the first thing. I would have thought you would have SOME money you could be putting into your PPOR, otherwise, what margin or cushion do you have if interest rates continue to rise?Maybe look into CF+ property for your next investment, rather than something that drains your cash flow.
You may need to have a look at your structure to see if you are set up right with your loans, before you go ahead to another investment.There are good and experienced people on these forums who can help you with this ( i am not one of them !). Maybe they are all just busy today, so you got me instead.
Good luck!
Hi Ninh
I am in a similar boat to yourself. I have an IP (purchased in 08) and my own place (purchased in 2010).
This is my thinking.1) Your own house is not tax deductable so you should pay it off as soon as possible.
2) Investing is where you will make the real money so you need to get into it as soon as possible.With these 2 thoughts in mind i come to the conclusion that i needed to do both. This is what i am currently trying to do.
I have set up my loan for my PPOR so that i will be paying off the minimum P&I repayments if the interest rate goes up to 8.5% however while the interest rates are lower than this i will be paying off the loan faster. Whatever money i have left i am going to put into my investment properties. As i already have 1 i need to find a place that i can afford with whats left (Which is not much at all). So i have started to do my resurch for a CF+ place or close to.I hope this helps.
Regards
chrisHate to say both structures are flawed:
1) Your should take out an interest only or P & I loan on your own home with a 100% offset account against it.
Pay the surplus funds into the offset account and not the loan itself.2) Take out an interest only loan secured against your investment loan.
Richard Taylor | Australia's leading private lender
Yes Ninh, Offset accounts are great, a really good tool for saving interest on your PPOR (you should listen to Richard!). We are same as Cama above, currently searching for a CF+ property, or something very close to that. This way we hopefully can continue to increase our borrowing power, rather than “hit the wall” after 2nd IP.
hope we are helping.Hi all – I've been following this thread with interest, and I am very new to this so please be kind!
Just wondering what exactly is an offset account? I've just purchased my fist IP, and from researching (and reading these forums!), have decided the best way to structure the loan is to not cross-collateralize wtih my PPOR, but to borrow 90% against my PPOR, which gives me $61,000 available equity, using some of this to pay the 20% required towards my new IP (on which I will have an 80% loan), this then leaves me around $18,000 worth of equity that I believe is "available" to me to go towards the next investment.
Should i be setting up an off-set account with my PPOR?
Geez – I'm confused after typing that, I hope you guys understand!
Any help would be appreciated!
Thanks
JessThanks guys
Sory bout this but
Q1: wats PPOR
Q2: I do have an offset account, however y not just put it into the homeloan instead so less tempting to take out.
Q3: wats CF + property
Q4: qld007 u say I shud take out interest only or p&i so which is better?
Sory for noobie qAll this info u guys giving me so helpful
Q1 – PPOR is Principle place of residence, or where you live
Q2 – Yes less tempting in the home loan, i agree, but for longer term planning you may want to keep the actual loan on the PPOR higher, say in case you ever wanted to move out and turn it into a renter. then you can (much more easily) take your equity, or your offset money with you. this is one reason I know of.
Q3 – CF+ is cash flow positive (means your cash flow (income less expenses, but after tax deductions are taken, is positive) ie not negative gearingHi Snoopy II
I never thought about using an offset account that way before but i think it is a very clever way to set things up.
I have a few friends in a situation where they want to turn their house into an IP but have payed to much of it off to make it worth it. I might look into changing my approach. In the past i have seen an offset account as worthless because you generaly pay more on interest and monthly fees than a basic account which would generaly counter a lot of the offset you get with having some cash in the account.
I guess another benefit of setting it up this way is that you can make the main loan Interest only and if something should happen say you loose your job then your minimum repayments are lower than P&I.Properly structured, buying an investment property should enable you to pay off your home loan sooner – the more you buy the faster it will be.
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
Terry W – Amen to that.
Cama20- yes very worthwhile looking at because often people want to do it and think they can just re-do the loan and it’s all fine (i had a mortgage broker tell me that we could do this, but thankfully i knew better!). i think it can be done, but you have to sell it back to yourself, pay stamp duty and not sure what else, not just simply re-finance.
so the idea would be to aim to have a huge amount in offset, (requires discipline, I agree) but make interest only payments into the loan.
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