Hi all,
I'm new to property investing and this is my first post on this forum so forgive me if I sound a bit green.
I purchased a 1bed unit 18 months ago for $295k and have been living at this address the whole time.
The purchase was funded by a 235k loan (P&I), FHOG and the remainder was cash deposit.
Repayments are currently ~1200/month
I've been making additional repayments during this time and as a result I currently owe 200k, with 28k redraw available.
The current value of the unit is approximately 320-350k, so I think I'm looking at equity of at least 120k.
My annual income is approx 70k before tax.The loan I currently have has a discounted interest rate for the first two years so in 6 months time the rate I pay will jump back up (+1%) to the standard variable rate. When this happens I would like to look at re-financing with the primary aim of establishing an offset account. So far so good?
Also in around 6 months time I would like purchase and move into a larger place with my partner and rent out my current 1bed unit (expected rent = 300+/week). This second purchase may be in the region of 400-500k.
My ultimate aim in the long term, like many people here, would be to have a few IP's that generate positive cash flow and help repay my future PPOR
I have many questions but I'll try to keep it brief:
1) Should I continue to make additional repayments on my current 1bed unit. Considering it does not currently have an offset account and additional repayments can be redrawn, is this the next best alternative or am I somehow messing things up for when I come to rent it out and am able to make deductions?
2) Apart from just seeking an offset account when refinancing my current property, should I be looking for anything else? Should I consider switching to IO loan also?
3) What would be the best way to structure the loan for my second purchase? Should I make use of the equity available somehow? I figure this would be better then redrawing the extra 28k I've paid – maybe I'm wrong?
Any comments would be greatly appreciated.
Michael
Hi Michael,
I am not a financial advisor so this is not to be considered specific financial advice to your circumstances.
But from an investors perspective this is what I do and has worked well for me.
IO loans to buy more ppty, I avoid cross securitising with lenders and spread my loans across lots of banks to avoid them controling my portfolio.
I do not pay down loans that will become IP's as that removes tax deductions instead I pay down bad debt i.e credit cards, car loans.
For your specific circumstances however it may be best to see your accountantHi Michael
I am not a financial advisor either. I am a mortgae broker, and am also a property investor. The way I structure my investment property loans in by Using interest only loans. I think you are on the right track with an offset account. These accounts can help you pay off you own home years quicker and save thousands of dollars in interest used the right way.
I have attached a link to our website that can help with educating yourself in regards to property investment. The business we are partnered with offer free weekly education webinars, seminars and ebook. You can also chat to professional property investment advisors.
http://propertyinabox.com.au/Gain-Financial-Solutions/
FYI: The rest of our website is currently under construction.
I hope this helps you a little.
Shayne
Gain Financial Solutions
[email protected]Not quiet right An offset account cannot help you pay of the loan sooner when it is an interest only loan unless of course it is a offset account with The Dragon.
A true 100% offset account will merely reduce your monthly interest being charged and NOT reduce the principal.
A good independant mortgage broker should be able to assist you in the restructure.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Guys,
Do you know of any good spreadsheets available that would allow me to model different scenarios?
I'd like to work out the pros and cons of paying off more of the loan now while I live at my current address.
E.g. Paying more now reduces my interest payments in the short term but when I move and the property is rented out there will be less interest deductions available.Michael
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