Hello Everyone HAPPY FRIDAY!!!
My current situation at the moment:
PPOR apartment valued at 400K and i have a available credit of 100K (paid extra). Loan amount is 187K.Combined after tax income $3300 fortnightly. no extra CC cards.
My question what is the best solution for me i want to buy purchase a new PPOR bigger place planning to have kids.
Do i go ahead and pay of my current loan as much as i can extra $$ goes into available credit or should i open a offset account and dump in the extra $$$ in that to offset against PPOR.Moving ahead – should i use the equality in my current PPOR to purchase my new PPOR therefore my current PPOR becomes IP? or use the $$$ in the offset account (as deposit) to purchase new PPOR. I’m just so confused. what is the best way to structure this?
Thanks for all your help!!!
If you’re considering turning the current home into an IP then STOP paying down the principal now and make extra repayments into an offset instead. You might find that you’ve already paid off too much to make it financially worthwhile to covert your current PPOR into an IP (you can only deduct from a $187k loan against a property worth $400k).
When it comes time to purchase your next PPOR you can tap into the equity against your current home to fund the deposit/costs and then set up a third loan to cover the remaining balance for your new home. Just make sure it’s all structured correctly so you there’s no taxation implications or cross coll.
I haven’t checked your borrowing capacity (nor do I know the finer details of your situation) so can’t advise on how much you could spend on your next purchase.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi sundipb
I see you are quite new to the forums. Welcome, and I hope you enjoy your time with us.
As Jamie has mentioned, if there is any possibility you may convert your PPOR to an IP, then it would be best to stop paying down the debt but instead pay into an offset account. This will allow you the flexibility of maximizing what your money can achieve later, without deciding what you are doing with your PPOR just yet.
In terms of how to amass money in that offset account faster than you could currently do with your salary alone, you might consider looking at putting your offset moneys to better use earning a higher interest rate elsewhere. We are able to get our investors up to 2% per month (ie up to 24% per annum) which would be more than sufficient to cover your monthly PPOR mortgage interest obligations with plenty left to spare.
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Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks for the tips guys however i’m still in a confused state, sorry for the late reply been nearly 3 months.
however recently apartment sold in my building same as mine for 450K. My situation as follows:
Apartment valued at 450K
Loan Amount 192K & Available Balance 97K (paid extra)
I have an extra 35K coming to be from my parents as gift.Our plans are is to live this apartment for another 5 years, been old sckool as i am my parents always said to pay off all your loans. So should i sink the extra 35K i get as a gift into my PPOR loan which will bring my available balance to 132K. Since we wont moving from our PPOR for some time is it than better to borrow $$$ against my PPOR since the equity amount will be 318K. Down the line after 5 years we are not quite sure with this PPOR will become IP or Sell it.
Oh have a paid to much off this PPOR to become a positively geared property and there is no tax benefit from it now.Hi Sundipb
If you are convinced the property will not be rented out in the future then sure go for your life and pay the additional 35K into the principle and carry on paying the loan down.
As far as the amount of loan you can claim as Tax deductible interest this will be the $132K which will reduce with each principal repayment so based on this figure the property is likely to be positively geared if you do decide to rent it in the future.
Big difference between the current equity position and the useable equity.
Care needs to be take to ensure that you don’t end contaminating the whole loan.
Your Broker should be able to guide you thru the maze.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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