Please help I’m new :)

Hi

welcome to the forum !

I think you should speak to  a finance broker to see how much you can borrow.
as Luke said stop paying money into the mortgage, instead put into offset account.

Once you have idea how much can you borrow, then you can start to look for the property within the price range.

 I think it's a starting point.

I hope this will help

Good luck  : )

Putting money in an offset account will save you money when the time comes when you need a sum of cash for personal expenses. If you pay the money into your investment property loan, you would need to redraw the money from the loan to pay for your new car or new house to live in. Because it is redrawn, this counts as new borrowings. As the money is for private use the interest will not be tax deductable.

E.g. 1) You owe $100k on your investment loan with another $200k sitting available as redraw. You withdraw $200k to buy a house to live in (not an investment) bringing your loan balance back up to $300k. The interest on the original $100k is tax deductable as it is for an investment property but because this is counted as new borrowings, the interest is tax deductable as the purpose of you reborrowing the $200k was not for investment purposes.

E.g. 2) You owe $300k on your investment loan and have $200k in your offset account (same as example 1 but you have paid the extra money into an offset account instead of into the loan). You take $200k out of the offset account to buy your new house to live in. The interest on the entire $300k loan balance remains tax deductable as you have not reborrowed the money for personal use, and the reason why you have this $300k loan is to buy your investment property. This saves you $4200 per year compared to example 1 above, assuming marginal tax rate of 30% and a interest rate of 7%. This really adds up in the long term!!!!

Best to talk to a finance broker like Richard to make sure your structure is correct and to ensure your structrue is correct for all future purchases.

Cheers,
Luke

Look on the bright side- you have managed to pay off $70k in 18 months, and only owe $100k on an investment property. There are plenty of people in worse positions than yourself!

I am sure a good mortgage broker can help you out with your future loans and structures to make sure you are being as tax effective as possible (of course tax is not the reason for investing, but you may as well structure yourself to be as tax effective as possible).

Cheers,
Luke

Hi Johnny

Look's like it's already been explained but if it helps, I wrote this article for Australian Property Investor magazine on this subject.

Cheers

Jamie

It's an account you put money into, and the balance of it is treated as though you'd paid it off the mortgage (so you pay no interest on your mortgage as per however much is in the offset account).  So let's say your mortgage owings are $300k and your offset account contains $40k.  Your mortgage will be charged interest only on $260k.

The difference between simply paying your $40k onto the mortgage itself versus putting in an offset account is:

– In an offset account, you can withdraw the money whenever you want, to use for whatever you want, without anyone's permission and without paying a fee

– If you stash your money in an offset account but are generally not able to control the desire to withdraw it and use it to buy a new plasma or a new pair of shoes, then maybe it is not an ideal option for you

– If the money is in an offset account, you can withdraw it years later and use the money as a deposit on a new house; be it an investment property or a home for you to live in.  Either way, it leaves the house you are moving out of with as much debt as possible; and shifting your cash reserves to your new house.  This is important if the new house is one you will live in.  Because mortgage interest on your home residence is not tax deductable (so it's best to have as much of your cash as possible in your home, and leave the debt for the investments)