I run an online business and am looking to invest in to properties to make a decent rental income. I have purchased a land for my first home and the entire process of title & building a house will be completed within a year. I am taking loan from the bank but I have savings which can be used to reduce the amount of loan from the bank. The confusion is whether to reduce the loan amount to maximum as of now or to use that money to invest in another property. Online research says that its safer to keep the mortgage amount as low as possible but couple of my friends tell me the opposite. What does your experience say?
Very easy question to answer.
Pay down the mortgage, then release the equity as a seperate investment split. These funds can then be used for a deposit for a property.
You achieve the reduction in mortgage, but also maximise your tax deductibility by recyling the debt into investment use. Speak to a investment focused finance broker who can set this up to ensure you’re not potentially causing tax issues or limiting your ability to invest in the future.
As an example:
300k mortgage, 100k cash.
You would pay down the mortgage to 200k, then setup a SEPERATE split of $100,000, interest only/Line of credit. The 100k would then be available to be used for deposits as needed.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Yes, I agree with Corey. You would be throwing tax savings away by using your cash to invest.
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
As above. The only risk is that your property doesn’t get as valued as high as you paid so you can’t redraw as much as you think.
As above. The only risk is that your property doesn’t get as valued as high as you paid so you can’t redraw as much as you think.
A fairly low risk in terms of % of properties out there – but this can be mitigated for the most part by having the property valued prior to a debt recycle.
Sometimes with the right structure you can have your cake and eat it.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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