Hi Guys,
We have owned our PPOR for around six months now and reduced it down from original purchase price of 330k down to about 250k owing. We are not high income, combined around 120k/pa at best.
When I return from overseas our offset will have round figures of 50-60k, plus being a good 30k in front on the principle side.
Should we just continue to smash the mortgage? Or should we look to invest in another property? I have a few months time up my sleeve to investigate possible avenues, but having some possible paths thrown my way would be appreciated.
I am definitely interested in investing, but would not likely put our home on the line to get started.
Any help will be appreciated.
Cheers
First stop paying down the principal. Keep putting extra into the offset account. That way it's your money to do with it what you want.
You don't need to put your home on the line to invest. You have at least $50K. Paying down your mortgage will give you a sound sleep but will not move you any further on the investment path.
You can use the offset account to pay deposit, legals etc. Take out a separate loan for an IP ( if that's your chosen investment strategy) for 80%. That way your PPOR is not secured against it.
You need to do the figures to work out how a CF- property will affect your living standard.
Agree with Catalyst- stop paying priciple and convert to IO with extra money going into an offset account. Then use money from the offset account to pay stamp dury and legals and a LOC secured against your PPOR to pay the deposit on a new IP.
Your accountant and broker will be able to advise the best way forward (assuming you have a good accountant and broker of course!!)
Cheers,
LukeAgree with the guys above. IO with offset account is the way to go. However, it's important that you remain disciplined and continue to make regular deposits into your offset account (ie. don't just make the minimal interest only repayments).
When it does come time to purchase an IP (if this is what you choose to do) it may be best to access some of the equity in your current PPOR to use as a deposit (and purchasing costs) instead of using the cash that's in your offset. When investing, it helps to have some back-up funds tucked away in an offset (good for risk minimisation).
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Jamie M wrote:Agree with the guys above. IO with offset account is the way to go. However, it's important that you remain disciplined and continue to make regular deposits into your offset account (ie. don't just make the minimal interest only repayments).
When it does come time to purchase an IP (if this is what you choose to do) it may be best to access some of the equity in your current PPOR to use as a deposit (and purchasing costs) instead of using the cash that's in your offset. When investing, it helps to have some back-up funds tucked away in an offset (good for risk minimisation).
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:)” title=”>:)” class=”bbcode_smiley” />Thanks guys. Its all food for thought and I appreciate it.
Ill just continue to pump the offset for now and once I get home sit down with a good advisor and/or broker and go from there. That'll be my next question in the coming months no doubt. Finding a decent one in the Hunter region.
Cheers
Catalyst wrote:First stop paying down the principal. Keep putting extra into the offset account. That way it's your money to do with it what you want.You don't need to put your home on the line to invest. You have at least $50K. Paying down your mortgage will give you a sound sleep but will not move you any further on the investment path.
You can use the offset account to pay deposit, legals etc. Take out a separate loan for an IP ( if that's your chosen investment strategy) for 80%. That way your PPOR is not secured against it.
You need to do the figures to work out how a CF- property will affect your living standard.
I have to disagree with Catalyst.
If you were to take money from your offset to pay for investment expenses then the interest on your non deductible home loan would increase – but you couldn’t claim it. At the same time your investment loan would be lower, resulting loss of money by paying more tax.
Having a IO loan with offset is good when you have plenty of equity. Then you could use a LOC and borrow for investing and keep the money in the offset.
If you don’t have equity to do this it would be better to pay the money into the home loan and then reborrow it, as a separate split of course, and use that to invest.
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 for an alternative view Terry.
Appreciated
Thanks Terry. I wasn't thinking and was confusing LOC with offset.
Thanks for clarifying. Don't want to confuse anyone.
The interest on your own home is not tax deductible … the interest on investment is. Paying off your own home will save you interest that has no benefits.
If you can get cashflowing investments that pay a higher cash-on-cash return than the interest on your home … then it starts to get interesting
Hi Terryw
Please check our website
thanks
Terry
I think if you check the website you have your answer.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
AusVietGuy wrote:Hi TerrywPlease check our website
thanks
I did and that is why I asked.
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
:)” title=”>:)” class=”bbcode_smiley” />
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