Pay off PPOR fully before starting first IP? Advice please

Hi Epsom,

The most important thing to remember is this:

PPOR – your mortgage and related costs are not tax deductible
IP – interest and borrowing costs are tax deductible

Your goal should always be to reduce your non-deductible debt, and use the deductible debt to leverage your investments.

You have a PPOR with a decent amount of equity in it, so use this equity to fund your IP purchases. Keep your own cash for the PPOR and living, and borrow for the IP.

The longer you wait to invest, by waiting until you’ve paid out your PPOR, could potentially reduce your returns.

I am by no means a financial advisor nor an expert, however based on the limited info you’ve given us – you’re in a great spot with good equity in your PPOR and an offset account holding your savings. You should be able to get a Line of Credit (LOC) from your lender with your PPOR and use this to fund your IP deposit, then get the rest of the loan with another lender. The LOC interest will be tax deductible, and the interest from the new lender. Doing it this way keeps the loans separate. If you were to use your own savings to fund an IP deposit, you would lose access to your personal funds and not be able to claim a deduction for this. Although of course the less you borrow and the more you pay yourself means the more chance of the property bringing you some rental income…

Keeping your savings in the offset account means you are reducing your non-deductible interest considerably, but can still access your money. if you’re keen to pay off PPOR a little quicker, can u look at increasing your principal repayments?

I would recommend finding a good mortgage broker or financial planner and going to them with your exact personal situation and see what options they present to you. Don’t be afraid of debt, see it as an opportunity to make the bank’s money work for you and make you more money.