If you fix it ties you down. It will make it harder to move banks. You may not intend to move now, but things change.

You will also get a rate of around 5% now – so you will be paying 2.49% extra. Do you think rates will jump more than 2.5% in 5  years? Even if they do you could still be worse off unless they jump much more as you will be paying extra for the fixed rate now.

Plenty of people rent in japan – but I agree it is a totally different market over there. The attitudes are very different. Properties haven't increased in value for more than 20 years. When you buy a property it actually goes down in value – so not much incentive to invest in property,

I have know of one No Doc lender at 75% LVR – but rates are high 9 to 11% pa. Hope there is now another lender out there.

Even lotto is a risk – dn't get your money back if you don't win!

If your husband is working for a company as PAYG then there is not much you can do to reduce tax – one way is salary sacrifice into super.

I wouldn't worry too much about the tax, just set yourselves up properly for investments and maximise the returns. eg. you could set up a discretionary trust and have all the income diverted to yourself – if you are on the lower income!

You also need to consider asset protection. People on high salaries are often on so much because of the risk involved – he may be a director for example. So you need to consider this too. What happens if he is sued>?

Hi Andrew

Do you have the offset linked to an investment loan or your own home loan? If you still have a home loan it would be preferable to link it to this – to save non-deductible interest.

Also, your interest rate sounds a bit high too. Maybe you should consider looking around a bit or ask your lender for a bigger discount.

The interest saved should be the equivalent of investing $5,000 at 5.50%pa = $275 saved per year = 75c per day. May not save much but it all adds up.

It would be best to put all spare cash into your offset and to leave it there as long as possible.

Hi

I haven't read those books, but I think the some points:

1) paying IO on your main residence reduces your monthly repayments which enables you to hold more investments. If the investments are growing faster than the interest being outlayed than this can help your overall position.

I agree it is best to pay off non-deductible debt first is a good principle. But paying less means owning more.

2) THis needs careful planning – see another recent thread on this topice. THe theory is you borrow to pay for investment expenses and free up more cash to pay into your non-deductibe debt (but see 1) – or into your 100% offset account. Overall the interest should be the same, but you are increasing your tax deductible interest.

3). This would not work now in a way that would benefit you. To be able to claim the interest the unit holder would need to get all of the rent and the capital gain. See ATO TD 2009/17. A lot of people have deeds set up which are not commerically viable and the ATO will deny the interest deductions. Lots of anguish in years to come. You would also have problems borrowing for this these days.

I think  capitalising the interest the LOC would be ok (see TD 2008/27, The principles governing the deductibility of compound interest are the same as those governing the deductibility of ordinary interest). The main problem with it was that it was one product set up secifically to reduce tax – with no other pupose.

Some have private binding rulings. Its worth a try with a ruling I think

You can increase the loan up to 80% of the value of the property (without LMI) assuming you can service. But your mum must agree to this. How you use the funds is up to you and your mum,