Hi everyone at the moment i have a PPOR which i just pay interest only on. I want to later on turn it into a IP also and then buy anoter PPOR.
But should i pay it off first then turn into IP or just keep paying the Interest instead of the Principal.
any thoughts if i am doing it correctly?
thanks
If your goals are to build wealth in property then keep paying interest and use the extra cash to get yourself into another property. You want to get maximum exposure to a growing market. For example. If you had $500,000 or $1,000,000 exposed to a market growing at 10% where are you going to get the greater gains. Hope that helps.
Pete Gwynne
[email protected]If you pay part of the principle off when you come to turning it into an IP you will have a low tax-deductable debt.
You may wantto buy another PPOR then and you will then have a big debt on that which is non tax-deductable.You can get an offset facility which you park your money in,
say you have a loan of 100K, and you have 10K in the offset, then you pay only interest on the 90K. Its like paying the loan off but you can access the money easily and you won't wreck up your tax-deductability.Cheers,
Chris.You should pay IO on it, unless you have enough cash to pay for the new one outright. Otherwise you will be decreasing investment debt which you can pay the interest on, while increasing the loan on your new home, which you cannot claim.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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