Dear Property Investors,
I am about to be a first home buyer and want to make sure I have things right and would really appreciate it if you would test my understanding. I have read a lot threads from others in a similar situation but really want to make sure I have it right.
About me:
My wife and are are both fresh out of Uni, and have been working full time for a year.
We have a dual income and no kids, with none on the horizon.
We can comfortably live on one income, so the other is dedicated entirely to saving and investing and will be for at least 5 more years.
We have a 45 000 deposit (+FHOG) and are looking at units priced between 300 000 and 360 000
We are located in one of Australia's capital cities and are looking at purchasing a 2 bedroom unit that is within cycling distance from work and the CBD.This is the plan:
1. Set up a new loan HomeSide HomePlus home loan with a 100% offset account 5 years interest only period.
2. Put all earnings and savings into the offset account and only take out our our living expenses as needed.
3. Pay interest only payments from the offset account for the first 5 years to keep the most amount of tax deductible debt for the future
4. After the 5 year interest only period is up, keep paying the minimum repayments from the offset account
5. When we decide to move on, take out a new loan on our new home with an interest only period and 100% offset account, using the savings in the offset account as the deposit.
6. Put all of our earnings and savings into the offset account of our PPOR and continue to pay the minimum payments on our older property.
7. Keep the older property indefinitely as it will eventually be positively geared.
8. Pay interest only payments for the maximum number years for the new home, and repeat the above steps.I think I am spot on, otherwise I wouldn't be posting yet, but can anyone suggest any improvements to the above strategy or a problem with the HomeSide HomePlus package.
Two independent mortgage brokers have suggested the HomeSide HomePlus package to us. I have read that some lenders do not offer a true 100% offset account that mean you still have to pay tax on the interest. HomeSide was mentioned in a post dated 2009 so I am not sure how it stands now. Is the HomeSide HomePlus the kind of true 100% offset account we are expecting? how can I check this, as I am not sure what to search for?
I really appreciate the time taken to look over my situation.
Best Regards,
Vader897
Hi Vader
Firstly welcome to the forum and I hope you enjoy your time with us.
I for one cant knock the Homeside Home plus package although again if you wanted a cheaper option it is out there with all of the same features of a true offset account etc.
Only thing i would say is if you are looing to rent the property in the long term i am not sure i would be putting all of your hard earned savings and FHOG into the loan itself but copping a bit of LMI and borrowing 90-95% keeping you cash as flexible as you can.
If you buy something for $300K why put in more than $30K as you will only have to reborrow it again down the track for your new deposit and then it will not be Tax deductible.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
vader897 wrote:Dear Property Investors,I am about to be a first home buyer and want to make sure I have things right and would really appreciate it if you would test my understanding. I have read a lot threads from others in a similar situation but really want to make sure I have it right.
About me:
My wife and are are both fresh out of Uni, and have been working full time for a year.
We have a dual income and no kids, with none on the horizon.
We can comfortably live on one income, so the other is dedicated entirely to saving and investing and will be for at least 5 more years.
We have a 45 000 deposit (+FHOG) and are looking at units priced between 300 000 and 360 000
We are located in one of Australia's capital cities and are looking at purchasing a 2 bedroom unit that is within cycling distance from work and the CBD.This is the plan:
1. Set up a new loan HomeSide HomePlus home loan with a 100% offset account 5 years interest only period.
2. Put all earnings and savings into the offset account and only take out our our living expenses as needed.
3. Pay interest only payments from the offset account for the first 5 years to keep the most amount of tax deductible debt for the future
4. After the 5 year interest only period is up, keep paying the minimum repayments from the offset account
5. When we decide to move on, take out a new loan on our new home with an interest only period and 100% offset account, using the savings in the offset account as the deposit.
6. Put all of our earnings and savings into the offset account of our PPOR and continue to pay the minimum payments on our older property.
7. Keep the older property indefinitely as it will eventually be positively geared.
8. Pay interest only payments for the maximum number years for the new home, and repeat the above steps.I think I am spot on, otherwise I wouldn't be posting yet, but can anyone suggest any improvements to the above strategy or a problem with the HomeSide HomePlus package.
Two independent mortgage brokers have suggested the HomeSide HomePlus package to us. I have read that some lenders do not offer a true 100% offset account that mean you still have to pay tax on the interest. HomeSide was mentioned in a post dated 2009 so I am not sure how it stands now. Is the HomeSide HomePlus the kind of true 100% offset account we are expecting? how can I check this, as I am not sure what to search for?
I really appreciate the time taken to look over my situation.
Best Regards,
Vader897
Sounds like a good structure.
As Richard mentioned, it might be an idea taking out a higher LVR loan and borrowing more. This way you've increased your future deductible debt. You'll be for more LMI but the additional interest you'll be claiming over the longer term should make up for it.
The Homeside product is great. If you're going above 90% LVR the rate will go up and it will lose its competitive advantage.
Cheers
Jamie
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]
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