Where to put my money?

Hi Luke,

Am I correct in thinking that I should use the money to pay it off the land as it will be our primary residence as the unit will become tax deductable.

Sounds about right to me, if those two choices were all you had. But of course, there would be other options, and this would be the right time to explore them.

What I am thinking here is simply this – go ahead with the house/land if that is the right plan for you. With the unit though, ask yourself these questions:-
1. How much is still owing on the unit vs its value (i.e. do you still owe 80% on a mortgage, or less? even much less)
2. Is the unit in an area where that style of accommodation is “in demand”? e.g. near a train station, shops, etc
3. If you were to sell it (it is your PPOR, so no CGT to pay – correct?) would it release sufficient equity to allow you to buy a better investment option?
4. Does the inheritance allow you to change your mind substantially? e.g. do you still want to live where the block of land is, now that you may have other choices?

If your answers to the above questions have you thinking “Maybe there really IS a better way”, perhaps take the time to explore some of these other options with a knowledgable adviser. Know where you are going to go before you start the journey.

Welcome aboard too – I’m glad you posted. I hope some of the answers that follow help you to arrive at a good decision.

Benny

Yeah, I would suggest you put the funds in an offset account attached to the loan used to acquire the land as this interest is not deductible. Don’t pay off the loan just yet, just in case you change your mind.

Actually as you are living in the unit you could also put the money in an offset account on this loan while it is non income producing and then move the cash over to the other loan once you move in.

As neither loan interest is deductible atm, the loan with the highest interest should probably be offset for now.