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  • Avatar of PaulGWAPaulGWA
    Member
    @PaulGWA
    Post count: 11

    Advise Needed

    I have renovated 2 houses now and moved up each time. I own 1 investment property which I have also recently renovated. Bought 1.5 years ago.

    Total equity now is approx $650

    We Still have a mortgage on own home $180k

    Should we pay this off before buying another investment property or go ahead an buy which reduces our capacity to pay the mortgage off quickly.

    We could probably pay this off within 2 or 3 years but dont want to sit on the side lines all that time.

    Not sure how to calculate the cash flow comparisons.

    Avatar of Robbie BRobbie B
    Member
    @Robbie-B
    Post count: 2,493

    Using a properly structured loan with offset, you could do both. The only way your capacity to rapay your existing mortgage would be reduced is if the interest only repayments and property expenses (after taxation benefits) on your investment property and the additional property you want to buy are more than the interest repayments on the investment loans you need. I cannot see this being the case with so much equity available.

    Also, the taxation benefits can be obtained in your weekly pay packet to help you pay your home off sooner.

    Robert Bou-Hamdan
    Mortgage Adviser

    http://www.mortgagepackaging.com.au

    Investor Links

    Avatar of Richard TaylorRichard Taylor
    Member
    @Qlds007
    Post count: 11,190

    I totally agree with Robert.

    Structured correctly you could get the investment property to work for reducing the term of your non tax deductible home loan and creating equity quicker.

    Tax benefits at source will also aid in speeding up the repayment process.

    Look at other ways to generate income such as wraps in orer to repay your home loan as well as increasing your asset base.

    Remember he who waits is lost.

    Cheers Richard
    richard at castlewhite.com.au
    Email me for details of our Qld wrap CD which gives you a full Installment Contract.

    Richard Taylor | Taylored Financial Solutions I Mortgage Broker
    http://www.tayloredfinancialsolutions.com.au
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    Mortgage Brokers specialising in Investor Loans. Request a copy of my API interview 0-40 in a decade

    Avatar of TerrywTerryw
    Member
    @Terryw
    Post count: 14,560

    Also, talk to a taxation specialist about borrowing to pay interest on your investment loans so that you can pay all available cash into your home loan or 100% offset account linked to your home loan. This will increase your deductions and speed up the payment of non-deductible debt.

    Terryw
    Discover Home Loans
    North Sydney
    Terry@discoverhomeloans.com.au

    Terryw | The Loan Experts Pty Ltd | FinLaw Pty Ltd
    http://www.terryw.com.au
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    Avatar of Robbie BRobbie B
    Member
    @Robbie-B
    Post count: 2,493

    Terry, again, this is illegal mate. You cannot deduct interest on interest to help pay off non-deductible debt.

    Robert Bou-Hamdan
    Mortgage Adviser

    http://www.mortgagepackaging.com.au

    Investor Links

    Avatar of Clay AClay A
    Member
    @Clay-A
    Post count: 33

    Hi Paul

    If you have the equity I would not hesitate.

    Clay

    Avatar of TerrywTerryw
    Member
    @Terryw
    Post count: 14,560
    Originally posted by The Mortgage Adviser:

    Terry, again, this is illegal mate. You cannot deduct interest on interest to help pay off non-deductible debt.

    Robert Bou-Hamdan
    Mortgage Adviser

    http://www.mortgagepackaging.com.au

    Investor Links

    Rob, Why do you feel borrowing to pay investment expenses would be illegal?

    By making statements like this you could scare people away from getting proper advice which could lead to thousands of dollars in savings.

    Are you an accountant or lawyer? If not, have you had advice on this matter? How do you know you are correct?

    BTW, keep it friendly!

    Terryw
    Discover Home Loans
    North Sydney
    Terry@discoverhomeloans.com.au

    Terryw | The Loan Experts Pty Ltd | FinLaw Pty Ltd
    http://www.terryw.com.au
    Email Me

    Law, Loans and Tax

    Avatar of MarisaMarisa
    Member
    @Marisa
    Post count: 615

    Hi Paul

    With your equity and I see you are from WA I would continue purchasing. There is still ongoing potential for Capital Gains in Perth and South West area.

    Regards Marisa

    Avatar of GrantH_1974GrantH_1974
    Member
    @GrantH_1974
    Post count: 190

    I suggest you talk to a financial planner before you make your decision.

    Cheers
    Jason.

    Avatar of PaulGWAPaulGWA
    Member
    @PaulGWA
    Post count: 11

    Financial planner? Hadn’t thought of that. Dont they just deal with their own investments?

    Avatar of Robbie BRobbie B
    Member
    @Robbie-B
    Post count: 2,493
    Originally posted by Terryw:

    Rob, Why do you feel borrowing to pay investment expenses would be illegal?

    I don’t think it is illegal. I think “borrowing to pay interest on your investment loans so that you can pay all available cash into your home loan or 100% offset account linked to your home loan” so “this will increase your deductions” is illegal.

    There is no problem doing what you said but interest on the additional borrowed funds are NOT deductible.

    By making statements like this you could scare people away from getting proper advice which could lead to thousands of dollars in savings.

    Let them sue me if I am wrong. I know this interest expense is NOT deductible so this does not concern me.

    Are you an accountant or lawyer?

    No.

    If not, have you had advice on this matter? How do you know you are correct?

    I have not had personal advice but I have extensively read legal advice to lenders who ‘had’ products to support this structure.

    BTW, keep it friendly!

    Just because I disagree with something you said does not mean I am trying to fight with you.

    If you are suggesting that obtaining another loan (loan 3) to pay interest on deductible debt (Loan 2) to pay non-deductible debt off quicker (Loan 1) and then deducting the interest on Loan 3 is legal, then I take issue with this.

    The structure you suggest is no different to capitalising interest on investment debt to pay non-deductible debt off quicker which is clearly illegal (Hart’s Case).

    Why would you get a loan at 6.75% to pay off a loan at 6.75% to help pay off non-deductible debt UNLESS you were capitalising interest on one of the loans?

    I thought we went through all this very recently.

    Robert Bou-Hamdan
    Mortgage Adviser

    http://www.mortgagepackaging.com.au

    Investor Links

    Avatar of TerrywTerryw
    Member
    @Terryw
    Post count: 14,560

    Lets not hijack this thread. Please see:
    http://www.propertyinvesting.com/forum/topic/17474.html

    Terryw
    Discover Home Loans
    North Sydney
    Terry@discoverhomeloans.com.au

    Terryw | The Loan Experts Pty Ltd | FinLaw Pty Ltd
    http://www.terryw.com.au
    Email Me

    Law, Loans and Tax

    Avatar of Robbie BRobbie B
    Member
    @Robbie-B
    Post count: 2,493

    Great idea… see you there! :)

    Robert Bou-Hamdan
    Mortgage Adviser

    http://www.mortgagepackaging.com.au

    Investor Links

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