HI Ferdinand,
I was in a simliar position as you 4 years ago; my partner also didn’t like the idea that i had a huge investment mortgage and a lot of “free cash “in the offset lying around.
Financially it made sense to do I/O with offset for my 6 IP- but at the same time i wanted my partner to sleep peacefully and to stop complaining
… so i made all my IP Half:Half — 50% I/O and the another half P/I with a offset account attached to the p/I part only.Really when you think about it- it’s hard to have more money in the offset then the mortgage ( well it will take a while ^^) – so instead to of making the whole loan connected to an offset- it made sense to connect it to the p/i part only
1. Wife is happy with having some P/I
2. My debt is reduced
3. the P/I part is paid off MUCH quicker- given it has the 100% offset against it.So i really have 12+ loan accounts with 12+ mortgage account for 6 IP – headace? yes it is….accountants hates me? – yes he does…
was it worth it? ABSOLUTELYRegards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
ferdinandch wrote:What you were saying is if I buy IPs and make it IO, don’t use an offset account attached to it ?If say it I get it topped up, and free up 30k and use it as the 10 percent of the IP, as a separate loan, will the interest on it also fully deductible?
As long as it’s for IP purpose- yes it is.
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
ferdinandch wrote:What you were saying is if I buy IPs and make it IO, don't use an offset account attached to it ?No!
If you borrow extra money don't deposit it into an offset account, even temporarily, before you use it.
You should have any offset account on your PPOR loan first. If none, then have the offset on the IP loan.
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
Really make a NEW offset account for EVERY new mortgage split- UNLESS the funds is going direct into a cheque or as a redraw on the new mortgage account.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks Michael,
Haha, I think I need to meet you Mike, when it is about the time for me to create more wealth. That sounds a good idea, that means you can have more IPs whilst also you clearly know you are getting more equities in your properties.
I don’t 100% understand, but I got the idea. That split, must be 50:50 ?
Michael, you know that my bank valued my property exactly same as the purchase price. If there is no major thing happened to the property or to the market as a whole, if I get it revalued, will Bank be fair to me? I mean, if there are two or three properties similar like mine, sold/selling for $625,000 three years from now, then Bank will revalue it quite close to that right ? My assumption is because I know that my PPOR will be worth what similar properties in my area worth.
Thanks Terry,
I think I will only top up as much as I need for the deposit for the IP.Yes it was a 50:50 split…
Ie- loan of $500,000 —- instead of $500,000 I/O with offset—
it was
$250,000 – P/I —offset
$250,000 -I/O — offset ( i don’t transfer money into this one though)I’ts a good thing that the bank has placed your valuation price the same as your purchase price- it means that the valuation was either:
1. HIGHER then the purchase price- alwasy a good thing ( they alwasy take the lower of the 2)
2. The difference in valuation + – was less or more then 5%In 3 years time if the market goes up- then yes you can get it re-value and release equity.
When the time comes, contact me and i can get a rough valuation done for you at that time.Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Michael,
I just realised though, with loan split for IPs like that, that means it is almost impossible to achieve positive CF, because you have to pay the principal as well on the half of the loan, means your repayment will be quite significant. So when you actually look for a property for an IP, you have to disregard the principal component for the calculation. Otherwise it is impossible to find positive CF properties. One more thing, your plan works if you don’t have any loan on your PPOR, but if you still have a chunky balance on your PPOR, I guess, better not to split the IPs and repay the PPOR first. Is it correct?
Ferdinand
that’s one of the big misinterpretation ppl have with CF properties….
you have the EXACT same property! but slightly different loan set up- so how can you say one is a CF property and the another is not??Remember the end result if it’s CF or Negative replies within the deal/ property it self.
I can buy a property for $500,0000 and only rents for $300 p/w – so say i i use $300,000 deposit and have a $200,000 mortgage–> yes you get + rental income but no it’s not a CF property purchase as such.
Always look at the bigger picture and long term end results; not what you see or don’t see week by week.
If serviceability is going to be a problem; then yes i suggest a FULL i/o loan.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
I still live at home
Not yet married…and im very asian ahha
When the time comes for a PPOR, i will transfer all offset account $$ into the PPOR no question ask- partner/wife can complain as much as she wants ( i guess im going to have to buy a MASSSSSIVE rock to silence her — if only a ring can be considered as an investment with the ATO –sigh.)
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Shape wrote:I still live at homeNot yet married…and im very asian ahha
No wonder, I hope my parents live here
Shape wrote:When the time comes for a PPOR, i will transfer all offset account $$ into the PPOR no question ask- partner/wife can complain as much as she wants ( i guess im going to have to buy a MASSSSSIVE rock to silence her — if only a ring can be considered as an investment with the ATO –sigh.)I guess if you buy 10 rocks 2-3 ct each, then ATO might consider that as an investment.
So the simple rule is still financial sense > peaceful sleep. It’s meaningless for me to split loans for my IPs, if I still have 400,000 balance on my PPOR.
Then I guess the structure will still be , IO + offset a/c for PPOR and IO only for IPs. And the offset a/c balance > the loan on PPOR, just pay it off. Then go to bank later to put the PPOR as a security to invest more.
Shape wrote:I’ts a good thing that the bank has placed your valuation price the same as your purchase price- it means that the valuation was either:
1. HIGHER then the purchase price- alwasy a good thing ( they alwasy take the lower of the 2)
2. The difference in valuation + – was less or more then 5%I think I know the reason, it is because the dwelling is a townhouse with 20 sqm front yard and 36 sqm paved with fence backyard. Even though there are similar townhouses there, my property is located 150 metres from soccer field, playground, childcare and small marketplace (which honestly, my wife and I did not know before, because they are located in front of other townhouses in the complex). The potential is good.
I discussed with my wife yesterday, and revaluation of that property is a good way to invest more later. But it raises another question, how often actually we can get a property revalued for the purpose of releasing some equities?
As often as you like- but generally i tell clients to wait 3 month –as prices won’t change for any time frame shorter then 3 month.
Some banks will only allow a Max of 2 equity release per year; after your 2nd one they will start to ask a LOT of questions and it does get harder.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Shape wrote:As often as you like- but generally i tell clients to wait 3 month –as prices won’t change for any time frame shorter then 3 month.Some banks will only allow a Max of 2 equity release per year; after your 2nd one they will start to ask a LOT of questions and it does get harder.
Regards
MichaelSo from what I understood yesterday from Terry’s explanation, just top up what we need for one IP, and top up again later in half or one year for another IP. Is it correct ?
Yep
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
I would advise people to be very careful when dealing with overseas "lenders". Often these "lenders" string people along with promises of finance. They collect all of your personal documents and then 'assess' you. You will nearly always be approved subject to paying a fee of some sort. Guess what happens when you pay the fee?
Then consider they have all your personal documents, including identity documents!
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
Finally, settlement took place two days ago, I am officially a first-home owner. So far I have mixed experience. In term of inspection, property search and negotiation, I found the articles I read elsewhere are overly complicated. I did only inspection for 5 properties in one Saturday, and that's it, the first property I inspected, the one I finally bought. I did only one offer, agent wanted lil bit more, and my second offer was accepted (within my budget and estimation). Maybe because now it's buyers' market.
I am happy with the purchase, it's all worth it.
With the mortgage broker, not too bad, but not perfectly happy as well. Same with the solicitor. In the future, I should find better ones.
Final question, what sorta documents I should have or my solicitor should send it to me from the settlement? So far I got nothing.
Thanks guys for all the helps. Michael and Terry especially.
Good work.
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
You should get a settlement statement from the solicitor and maybe a copy of the contract you signed too.
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
I can tell you will get the solicitor’s BILL for sure
hahahRegards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Shape wrote:I can tell you will get the solicitor's BILL for sure hahah Regards MichaelOwh, he didn't even issue an invoice with term of payment, he direct debited from the bank's available fund for settlement.
… so i made all my IP Half:Half — 50% I/O and the another half P/I with a offset account attached to the p/I part only.
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