All Topics / Help Needed! / what would you do?

Viewing 8 posts - 1 through 8 (of 8 total)
  • Profile photo of SwifteagleSwifteagle
    Participant
    @swifteagle
    Join Date: 2006
    Post Count: 34
    July 27, 2014 - 11:31 am

    Hi There,

    So I put forward my case. It is a bit of a problem, but a good one to have.

    My situation :
    31 years old
    House mortgage owing 197k, a cheap house purchased for 250k. Currently paying 5.28% interest until 2040.
    No other debts.

    The problem(good though) :

    170k cash in my offset account… What to do?
    If I put all that money towards the loan and have it recalculated my repayments out of the top of my head would be 100 dollars fortnightly. Allowing me to save lots, I am a decipline saver.

    I don’t really know what to do and my friends are not well educated nor interested in money, so I don’t have many people to talk to nor am I willing to share with.

    I am thinking so far:
    8k for an internet business/ venture
    7k going on holidays
    Rest onto the mortgage…

    Was thinking some stocks, but I think the markets around the world are not necessarily stable..

    What would you do? I understand and accept this is not financial advise, but more of ideas…

    would very much appreciate your input.
    P. S

    Not into financial advisors, but if you know of a damn good one could you let me know.. Might consider using one.

    Profile photo of TheNewGuyTheNewGuy
    Participant
    @thenewguy
    Join Date: 2014
    Post Count: 151
    July 27, 2014 - 12:39 pm

    Figure out a goal and work towards that. Having a goal will help you make your decisions.

    Also, it depends on how much you earn from other sources, like your job since serviceability is important as well.

    Without much other information, and if I wanted to stay in my current house. I would probably pay it down, then redraw an investment loan. How much to redraw and where / how to invest would depend more on your current situation. A few other things to consider at your age:

    – Are you married / do you have a partner to join in your investments?
    – Are you planning on having kids? Paying for them.
    – What is your work life going to look like in the future? More money / less money? Want to work more, or less?
    – How is your super looking?
    etc

    • This reply was modified 10 years, 5 months ago by Profile photo of TheNewGuy TheNewGuy.
    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416
    July 27, 2014 - 2:50 pm

    Hi SwiftE,
    A good problem to have, for sure !! If you have $170k in Offset, then you would be CREAMING your mortgage (only paying Interest on $27k, and the rest of your monthly payment will be paying off principal). I would suggest you check out just how well your Offset is already working. It MAY be advantageous to NOT pay it off your Home Loan (especially if you have ANY plans of turning this PPOR into an IP down the track).

    See, while in your Offset, all of the $170k is YOURS, to do with as you wish. You have paid Tax on it – you can take amounts out to do what you wish. But if you pay it off your mortgage, then any requirement for chunks of cash will either have to come from more savings, or from a Redraw. Think long and hard (and ask a heap of questions) before doing this.

    In case it helps, do take a look at this thread :-
    https://www.propertyinvesting.com/forums/general-property/4349450

    That thread has a post specifically about Offsets, and how GOOD they are. The other posts endeavour to answer a heap of “early questions” that may be worth considering before making your next move.

    Do keep in touch as you arrive at your decision points. As NewGuy says, working out just what you want to do probably comes first – then, HOW do you make that happen. The HOW “might” mean paying down your Home Loan and having less outgoings per week, or it may not. Good luck with it,

    Benny

    • This reply was modified 10 years, 5 months ago by Profile photo of Benny Benny.
    Profile photo of superAndrewsuperAndrew
    Participant
    @superandrew
    Join Date: 2014
    Post Count: 188
    July 27, 2014 - 7:06 pm

    Hi Swifteagle

    I’m assuming the house is your PPOR?

    Why not purchase an investment property?

    You could comfortably buy an investment property around the $500k mark with your savings, depending on your income level and how aggressively you want to borrow.

    You would do this by:
    1. Paying off your PPOR mortgage using your savings in the offset account.
    2. Draw equity from your PPOR to fund the deposit for your investment property.

    If you directly use the savings in the offset account for the deposit then this would increase the interest on your PPOR. This interest will be non-deductible.

    However if you pay off the PPOR mortgage and draw equity from your PPOR then the interest will be deductible.

    Cheers

    Andrew

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of SwifteagleSwifteagle
    Participant
    @swifteagle
    Join Date: 2006
    Post Count: 34
    July 28, 2014 - 6:44 am

    Hi everyone,

    Thank you so much for the replies. I am still leaning towards the idea of paying the mortgage off and using then a line of credit to take money out for other investments. This way I save money interest wise and the money still available if required.

    If anyone else has any more suggestions I would appreciate them.

    Thanks for everyone’s comments.

    Profile photo of Modernity InvestingModernity Investing
    Participant
    @mark-coburn
    Join Date: 2006
    Post Count: 181
    July 28, 2014 - 8:53 am

    Swifteagle,

    You have done well, and I like your thinking. You need to talk to someone who understands what the key differences are between after-tax debt and before-tax debt and the effect they both can have on building wealth. The key is having less of one and plenty of the other.

    If you wait while you reduce your after-tax debt before you start to invest, you will be wasting your greatest investing asset. Time is the one thing all investors wish they had more of, cash or savings is the second most important ingredient in investing after time.

    This is an issue I spend a lot of time talking about to my clients. So it might be worth you looking at this idea too, before-tax debt is key in building you wealth, it’s the type of debt that can actually make you money faster than saving ever can. Your heading in the right direction, so well done.

    Modernity Investing
    Email Me

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    July 28, 2014 - 8:27 pm

    Hi Swift

    I don’t have an issue with what you want to do and think if it gives you comfort and peace of mind there is no issue with it.

    I do however suggest you seek some professional advice in regards to the loan restructure as you could certainly save a considerable amount on the interest rate which would result in reduced repayments.

    I would also suggest that you look to diversify and maybe mix an investment property in with other forms of income producing assets.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Modernity InvestingModernity Investing
    Participant
    @mark-coburn
    Join Date: 2006
    Post Count: 181
    March 2, 2015 - 1:06 pm

    Swift,

    How did you go? what did you end up doing?

    Modernity Investing
    Email Me

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