Paying of a mortgage HELP!

Well I'm no expert and can't advise on the intricacies. But looking at that info, if you're having trouble making repayments, I'd be switching to an interest only loan attached to a 100% offset account, and then save every single cent and rent into this offset account. There's obviously no point in trying to fix now because the fixed rates are going to be unaffordable (as they are usually higher than current variable rates), and at least based on my mortgage, it may not be possible to have an offset account.

100% offset accounts are great. It's like a savings account with the money freely accessible at all times, but the money within earns interest at the same rate as that of your mortgage rate. So if you keep $20K in the offset account it effectively reduces your outstanding loan to $260K and you only pay interest on this amount.

And as and when you want to negatively gear your property to the max, draw all money out of that offset account and you're left with $280K deductible debt. This is assuming you are on an interest only loan.

If you are already up to your eyeballs in debt trying to service the mortgage of just this property, I don't think it'd be a great idea to get another rental property unless of course you find something that is positively geared.

Good question.  I would also like to know about the depreciation schedule. I also agree with fWord.  And moving back into your parents rent free for a while would be a financial blessing.  Interest only loan with offset account sounds great.  I'm in a similar situation to yourself and planning to do the same, but still just learning the ropes and reading as much as I can first.  I am only looking at a positively geared properties too.

what a quantity surveyor is
http://www.aiqs.com.au/What_is_QS/index.htm

Each fitting in the house reduces in value over a life span of the item (Carpets, Vinyl floor, Hot water service, Ect)
The quantity surveyor works out the life span, as this is a hard thing to find out from the ATO.
Then the devalued amount is able to be claimed as an incurred expense in earning the rental income.

Depending on when the building was built you may be able to claim the devalue amount on the construction costs of the building if built recently. The quantity surveyor works this out sometimes as to when a building was built and what the construction cost was.
This can be claimed over 40 years if renting out the building. This is 2.5% of the construction costs each year.

The quantity surveyor then creates a depreciation schedule report to you that you can give to your accountant to do the depreciation component of your rental property at tax return time EOF.

So if you built a house recently and it cost $200,000 to construct then you could claim depreciation expense to increase the expenses by 2.5% of $200,000
which is $5,000 a year, however this $5000 is taken off the cost base which means you pay more capital gains tax in the future.
So $5000 * .30 (tax paid on wage 30% )= $1500 is what you could get back in the tax return from this depreciation.

why would someone claim this ?
To increase their cash flow by $1500 a year through a tax refund or via tax variation.

In straight line depreciation the amount depreciated each year = original value / life span in years
 so 40 years is 100% of original construction cost / 40 years
this equals 2.5% of construction cost per year for 40 years.

Fitting depreciation is different as the life spans are usually shorter and it is not subtracted off the cost base but at the end of the life span the item is worth zero and usually needs replacement anyway.

If the house was your main residence it may be able to be claimed as your main residence as you are living with mum and dad for 6 years even though it is rented out ,
check with your accountant on this one as the asset has been split and it may be only for 50% of the property

a QS report will cost you about $500 and is well worth it. They will find things that you hadn't even thought about and increase your deductions and save you tax. A report or estimate made by yourself or an accountant wouldn't be acceptable anyway.

I would also suggest the IO loan with the 100% offset. Try to save as much as possible in the early stages as it will give you a buffer and save you interest at the same time. Maybe even consider doing the income tax variation so you can reduce you tax each week rather than waiting for up to a year to get your tax back. THis money saved each week can go into your offset and save you even more interest.

very True Ninh.