Forum Replies Created
Other costs you may have to consider
* Property Manager costs, unless you manage it yourself.
* Landlord insurance
* Land Tax if relevant
* Rent you have to pay, because you cant live thereNucopia wrote:with 49K owing – I could pay this off with cash and use both to finance more I.P purchases, figure @ 80% I could use them to borrow 200K and would need maybe 35K cash to cover deposits and settlements.
sorry Maybe I am missing something, but do remember that the majority of the loans will be against the new properties, and you will only need to borrow the difference from your current properties.therefore why lose the deductibility on the 49,000 at all
Nucopia wrote:whether I should look at principal and interest loans now or stick with the int only .I think my cash flow is ok as is my borrowing capacity. As you can gather from my posts I dont like debt for debts sake and the way things are going interest only payments are on the increase.I agree but you dont really have the debt or the payments if the cash is in an offset, and your loans are interest only – placing cash in the offset is better than paying P&I. Of course you still need to be smart about using it if you do.
Within a short time with the current economic environment, having access to a pool of cash, where it may actually be difficult for you to reacess money, may put you in an enviable postion to pounce on deals that others can't.
It sounds like you are fearful of your inability to not use the cash, and by making sure you are obligated to make the principle payments you have forced yourself to be smart. The fact you are fearful is being smart, just dont let it rule what you do.
ruk wrote:am i smart or stupid
Not to state the obvious – here you are asking this question, about some solution you have devised, instead of visiting an accountant and asking the right question, and having them devise the right answer.
<br /
:)” title=”>:)” class=”bbcode_smiley” />You investigated subdivision, but would they allow adding a second house without subdivision, or a large extension hint hint
Nucopia wrote:If I have a mortgage over the I.P or the PPoR (both R tax deductible) for investing it does not worry me, and its just a choice of which gives me the most advantage later when I do decide to draw down equity ..
I suppose I just don't like the feeling of doing nothing when I have untapped equity and cash coupled with my desire to acquire more i.Ps .
Its some thing I will have to get used to.
I would suggest you get used to having the excess cash in offset accounts, unless you can absolutely guarantee that the cash you redraw is going to be used for investment puposes. Otherwise it loses its deductibility.If you can use the equity built up in the current properties and use those borrowings, then all of the money used will be deductible.
I would only ever use cash if I had no equity left to use.
Best to talk to your accountant
Extra Deductions gained on $X amount (over and above current deductions) LESS
Stamp duty and other associated costs for selling to a trust
Vs
Not sellingAlso be careful if you are buying in a trust
I had to teach them how a hybrid trust worked and your morgage choice guy is just not going to do that for you.
Also if you do relook at larger banks, be careful of Professional Pack Fees. The real interest rate can be quite high if loan value is low.
Justin
A non-bank lender normally will only allow the wife to go guarantor, as she is not on title. In fact some will not allow her to be on the loan documents at all or allow her income to be used, as she has no beneficial interest.
The larger banks, who have much open clauses in their loan documents ensuring they catch you many ways, alwasy try to get the partner on as borrower, to reduce their risk, but will allow guaranteing as well. – See if the bank will alow her to be guarantor, not borrower and still give you the discount rate.
Why – If only as Guarantor then the tax department could never say that half the interest is hers. If borrower, can the tax department claim that – This is really a question for your accountant.
Justin
1) Consider asking your bank to add an offset account, and place extra funds in there. Why – a) You save the same amount of interest you would save by paying down the loan. b) You maintain the deductibility of the underlying debt, so if ever you use the cash in the offset for a non-income producing purpose, all of the interest on the loan is still deductible. Talk to your accountant about this.
2) Name on mortgage is different from how much of the property she may own. If having the property in your name is more beneficial for tax purposes, then she could have a 1% (or other) interest in the property, and you own the balance. The bank now has her name on the mortgage and everyone is happy. Again talk to your accountant about this – take with you the values, your wages etc so you can calculate the real benefit.
3) Apart from the obvious costs of moving – tax deductibility would be the major one. Another one to pass through your accountant, taking into account the rent you pay. Even if you do decide to move in, (1) above is still relevant, becuase you may decide to turn it into an IP at another date.
I know Helen personally – Helen comes from an education angle and everything is based on Education only, although she does have advanced groups, where people get together to buy property, which she also participates. What I mean by participates, is she will look to buy as well, but it is not her property she is selling!
Helen is very genuine and everything is upfront and out in the open.
I quite often speak at her seminars on finance, and she normally gets experts in on different subjects to speak, as well as sprouting information from her experiences.
Success rate is high as the groups are reasonable small, and she holds your hand for the duration of the course. It is very one on one.
Originally posted by ctaing:* Is it available on standard loan product or is it an extra feature in premium products?
Normally the more functionality the more you pay – but there are some reasonable rates out the for Offset accounts. Close to or just more expensive that a simple loan with redraw
* And is the method of interest calculation of the Offset similar to that of Repayment Redraw facility?100% offset – pretty well means what it says nowadays (Although in the past…..) So yes say as if you made a repayment with redraw.
On a separate issue to save stamp duty on loan already paid – Do we face a problem with claiming for negative gearing when we pay off PPOR loan and use it as an Investment loan?Not exactly sure what you meant here, but..
If you pay down a PPOR, and then redraw an amount to buy an investment loan, it would be better that the redraw was a separate split, to differentiate it from all – there can be no question then.
just make sure that the money from that split does not pass through you personal accounts. It may be worth having a separate bank account for business purpose only. A good accountant could advise you.
Regards
JohnInspired Finance
(02) 9944 7776I would have to disagree with both Terry and Simon.
Banks
Do use mortgage insurers when they need to.The banks will normally self insure, but under capital adequacy requirements they have to set aside a certain amount of capital. If they are short cash at any stage they quite often grab a whole lot of mortgages and take them to the insurer. Once insured they no longer carry the risk, and therefore they can free up capital.
I had a client where that exact thing happened.
Need confirmation – just ask the bank which insurer they use, and normally they will use one or the other. It is not a coincidence, that their borrowing limits are similar to the Insurers.
And banks by far have the more insidious clauses in their loan documentation.
Non Banks
1) quite often have AAA rating, as they are only dealing in mortgages. most of our banks are only AA rated.
2) The mortgages are normally held in trust against the loans, with the two big trustee companies, Perpetual and Permanent. (Unless GE who manage their own)
3) The rates are normally very competitive.Mortagage Originators
All they really do is pick different products from the non banks and rebrand them to their own name.Wizard is actually owned by GE, and GE also offer a whitelabel (rebranding) product to many.
At the end of the day it is horses for courses. Which fits within the strategy for the property you are buying. That may be a major bank.
Originally posted by ctaing:I would definitely look at refinancing current loan and take out an LOC, and IO loan for IP purchase in the coming months. Also, we may need a separate business loan for meeting capital expenditures some time later.
Can a split loan feature accommodate for them all for tax compliance (personal, business and investment use).
Be careful here when setting it up. You can use a split for whatever purpose you want – basically you are lending to yourself or your business.
a) I like Simons method of using an offset instead of a LOC, if you ever think you may move out and turn the property into an investment. But that may be a problem if some of the splits are for other purposes.
b) If you deposit funds from a split into a personal LOC, that may destroy the ability to claim the interest.
Talk to a good accountant.
Regards
JohnInspired Finance
(02) 9944 7776Financing is only 60-65% from memory. and they only allow a certain percentage of the rent.
Regards
JohnInspired Finance
(02) 9944 7776or you can’t borrow at all if it is too small.
Be wary of anything smaller than 35 SQM. Avoid anything under 25Sqm
Not saying you may not get some specialist finance, but remember one day you may want to sell, and all the buyers will have the same problem.
Regards
JohnInspired Finance
(02) 9944 7776Also they were not able to get the volumes, and now the CashFlow mortgage product is apprearing all over the place.
Regards
JohnInspired Finance
(02) 9944 7776It should be cheap with all that negative goodwill [biggrin]
Regards
JohnInspired Finance
(02) 9944 7776The LVR depends on your age
if 60 then it is 15% and add 1% for every one year age after that. So if 61 then 16%. Up to 90 at 50%
That is if you take out the lump sum. You can get supplementary payments each month.
You can also ask for a certain amount of equity to be guaranteed left at the end of the loan. I won’t go into exactly how they do that, but it is based on their own tracking critera of how the property will perform. I will say that all of the lenders assume over time a 3% growth in the property, so it is conservative.
The better ones also have a no negative amount guarantee – so if the property value does fall, that is their problem.
Regards
JohnInspired Finance
(02) 9944 7776Originally posted by stargazer:Should i also contact my insurance company or see what the builder has to say.
As per the previous response by the person that is a Structural Engineer – Contact Your Insurer.
I would add
– that your insurer will work to make sure that is is the builders fault !
– the builder will work to prove it was not him.Best to let your insurer do the work.
Regards
JohnInspired Finance
(02) 9944 7776You have total debt of $695,000
So a 80% Lo Doc loan on both would cover it
IP1 Loan 360,000 Value 450,000
IP2 Loan 360,000 Value 450,000
and should release your other title.
If both are with the same bank, tell them that is what you want to do, or take your business elsewhere.
If different banks, do a variation on the loan on IP1 and get access to the other funds.
Tell the bank for Ip2 that you will be reducing the LVR to 80% and want your title back, or otherwise you will take your business elsewhere.
Regards
JohnInspired Finance
(02) 9944 7776What about Satellite ?
With the dish you only need a normal phone line.On another note.
Optus once put a lovely form in my mailbox, with my address on it offering cable to my battle-axe block.So I rang them and said “yes”. They said “no” I was too far from the road. I said I had a letter from them adressed to me, it did not say anything about too far from the road.
after a month of runaround A letter to the CEO of optus had it installed in 3 days time – worked perfectly.
Just keep persisting!
Regards
JohnInspired Finance
(02) 9944 7776
:)” title=”>:)” class=”bbcode_smiley” />
