Great.
One thing is for sure, if you work out a good plan now and stick with it, you will set yourselves up for a good future financially.
A lot of people are not thinking of the long term outcomes at this stage in their lives.Well done!
Do you intend living in your current home forever?
If you don't then you may be backing yourself into a corner with limited options.
For example if you choose to move out of this place and buy another home and rent out your existing property you'll create a situation where most of your debt is non-deductible. An offset account may be a better option if a house move is a possibility.
No we dont plan on living here forever, but we also dont plan on moving out in 2-3 years. At this stage it would be between 10-15 years, but could possibly be longer and maybe until we are around 50. Or then again, we could pay this off really quick, save up for a couple of years and then buy a nice house in a really nice suburb like Williamstown.
Still unsure on what to do exactly. I think paying off the house, or getting it very low, is the priority. I still like the idea of sticking the money in a compounding interest account and watch it grow, then live off the interest and savings. But that doesn't seem to be too popular. Not sure how to tackle the property/real estate investment.
I have a friend who's dad is really sick, still working at age 69, planned to retire in the new year but probably won't live long after that. It really makes me not want to work much after 50. Why spend all your life working, plan to retire and only be around a little bit to enjoy it.
As Derek has mentioned if there is any possibility that you may rent the place out and buy another PPOR DO NOT pay the loan down but structure in a manner that the loan is interest only with 100% offset account.
Be smart and maximise the tax deductions you can claim rather than pay Tax on your rent.
Doesnt mean you cannot ever pay the loan off but at least you have the option and in the meantime have the cash oncall.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
brmiau wrote:I still like the idea of sticking the money in a compounding interest account and watch it grow, then live off the interest and savings. But that doesn't seem to be too popular. Not sure how to tackle the property/real estate investment.I have a friend who's dad is really sick, still working at age 69, planned to retire in the new year but probably won't live long after that. It really makes me not want to work much after 50. Why spend all your life working, plan to retire and only be around a little bit to enjoy it.
You need to get a book on basic economics to help you understand why this is not the best strategy. If you retire at 50 your money will need to last you 30+ years. Assuming you live off the interest your money is not growing over time and is actually decreasing in real terms. With inflation the cost of living will double in that 30 years but you'll still be receiving the same interest payments that you receive when you are 50. I hate to say it but you'd have to go back to work in your 60's in order to live.
20 years ago $30,000pa was a decent wage. Now it's below the poverty line.As I said, you need investments that grow (at least) along with inflation.
Financial_Help wrote:It is really important to pay all the debt before investing on property. If you do that you could easily get a lender and also help you to get a better loan for investing on property..;Ridiculous advice from a spammer.
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
Ok clearly the term deposit idea isn't a great one.
I cant convince my mrs to buy another property yet. She has her mind set on paying off the house or getting it really low, as in $50k and under before we buy some investments. Which I tend to agree with. Buy that stage we'll be 30 and in a good position to start buying investment properties. Hopefully.
Is it advisable to pay the investment properties off completely and have rent coming in as income? Say from 3 or 4 properties. I have NO idea about all the offset accounts, negative gearing, tax deductions etc…. If anyones in Melbourne, I'd be keen to talk in person more about it in depth in the new year.
Cheers
Once you've paid off your personal debt you could start to pay off investment debts. But I think you would be better to use IO loans with offset accounts – unless you are tempted to spend.
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
Hi brmiau ,
My wife and i are 27 both from Melbourne and if there is any advice i can give then its this:
1) Paying off your home wont make you wealthy but it might make life that bit easier. Allot of people believe that once you have your home paid off you are rich and wealthy.But really even if you have your home paid for if you loose your job or some thing happens how do you pay your bills?
I have recently learnt from the likes of Terry and Richard that why not do both?
My plan for the new year is to pay off my home within two years but at the same time buy a investment IP.But make sure you have a strong cash flow balance and if you carry any debt make sure its good debt.
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
Hey Brmiau.
How to send you a private inbox message?
KimQlds007 wrote:As Derek has mentioned if there is any possibility that you may rent the place out and buy another PPOR DO NOT pay the loan down but structure in a manner that the loan is interest only with 100% offset account.Be smart and maximise the tax deductions you can claim rather than pay Tax on your rent.
Doesnt mean you cannot ever pay the loan off but at least you have the option and in the meantime have the cash oncall.
Cheers
Yours in Finance
I'm in somewhat of a similar situation to brmiau.
At the moment , looking at paying our (PPOR) mortgage off as quick as possible.
We will prob live here another 3 years or so and then prob need to look for a bigger place bc of family.
Unsure whether at that point we would then turn this current PPOR into an investment property or sell it to buy this "bigger place".I have just re financed to be able to draw a LOC.
We were advised to pay down our PPOR mortgage and use the LOC for investing.Can you just clarify why you are saying not to pay off the mortgage if you are possibly moving in the future?
Dear brmiau,
I am 30.
My current plan is to pay off my PPOR mortgage within 13 months.
But also in the next 13 months, I am looking at buying +ve cash flow in USA and doing some capital development back here in Australia.If you had asked me 4 years ago (when I bought the house) to buy an investment property I think I would've died just thinking about both the mortgage on my house plus the debt on those investment properties. It was just too much for me.
In some ways I wish I had gotten into investing earlier……..
However at the same time, I'm really relieved that I am now about to pay off my mortgage and can concentrate on putting all my money towards investing now.It's a more conservative approach I guess.
I think this was said in one of the earlier replies to you.
It all depends on your RISK tolerance.Kimberley if you are thinking of renting the current PPOR out and buying another PPOR then you certainly dont want to be paying down the principal on your mortgage.
Simple reason being is that the interest is Tax deductible when you rent the property out however for your own PPOR it is not.
What you would end up with is a IP (former PPOR) with no loan so nothing to deduct but rent coming in which is added to your Taxable income.You would then go and take out a new PPOR loan and be making the repayments with after Tax dollars.
You would have it the wrong way.
Switch the current PPOR loan to an interest only loan with 100% offset account so you save interest whilst you are living in the property and then when you are ready to move out decouple the offset account and link it to the new property and the interest on the entire debt on the new IP (old PPOR) becomes fully deductible.Hope this makes sense.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I see, thanks for that.
How about paying it down as much as possible now…..
……but not close the account.And when it's time to move to the new PPOR, remortgage this IP (the first PPOR) with interest only payments.
Does that make sense?Kimberly wrote:How about paying it down as much as possible now…..
……but not close the account.And when it's time to move to the new PPOR, remortgage this IP (the first PPOR) with interest only payments.
Does that make sense?Doesn't make sense because you will lost deductibility of the interest
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
Kimberly wrote:How about paying it down as much as possible now…..
……but not close the account.And when it's time to move to the new PPOR, remortgage this IP (the first PPOR) with interest only payments.
Does that make sense?Kimberly,
Interest deductability is based on what the borrowings are used for, not on where they come from. In this case when you redraw your loan that is classed as a new loan and you are USING it to buy a PPOR. So even though the loan is on the IP it was not used to buy that IP. Thats why if you keep it in an offset account you are free to do what you want with it as you are not redrawing any loan.
Cheers,
Nathan
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