In Steve’s book he talks about putting a twenty percent deposit down on a property.I always thought it was best to borrow the lot,that way you could claim all the interest as a tax deduction instead of only 80 percent of it.Also by paying interest only on the loan you can use any extra income to pay off other debt.Can someone explain!
Hi this I can answer, paying 20% can reduce your up front fees and decrease your loan. [
] This is because of lenders Mortgage Insurance that comes into play once you borrow over 80%. Fine tobe able to claim the interest but why pay more then you have too! Often with borrowing 80% depending on the bank you then also do not have to pay a valuation fee to the bank. I am sure others will explain much better but that would be it in a nutshell.[]IMO, the bigger the deposit the better. While the interest is deductible, it’s still money out of your pocket. The sooner the loan is payed out the sooner that property is making money (unless you only want it for the capital gain rather than the income stream). Even though a tenant may be paying the loan off for you, do you want the rent going to the bank, or to you?
Borrowing over 80% means you will have to pay mortgage insurance. there are only 2 mortgage insurers and they both have a maximum exposure level. This means there will be a limit on the amount of money you could borrow-this limit is relatively low. So borrowing 80% or less will help you get around this.
Terryw
Discover Home Loans
North Sydney
[email protected]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
It depends on what tool you are using. Steve will tell you to use the right tool for each job.
We just bought a house 2 weeks ago for 110k, with 80% funded by a P&I loan. The other 20% (and the closing costs) is funded by a LOC on our own house, so the purchase is 100% funded by bank money (and the wrappee’s deposit of 3k). Our total payment is 706.71/month. We have already got the property wrapped for 134,900 to new owners who will move in on the day after settlement (11th October) and who will be paying us 1115.83/month. Cashflow is 409/month for no money out of our pocket.
100% finance was a good tool for this wrap.
We have rental properties though, and we pay them down as fast as possible.
Different tool for a different job.Hope this helps
Lance
.
Fair Go Homes
http://fairgohomes.com.auRapt with Wrapping!
(07) 5465 4999
[email protected]They’re amazing figures Lance. I justchecked out your website. Looks like you’ve got a very professional set up going.
cheers,
Darren.
] This is because of lenders Mortgage Insurance that comes into play once you borrow over 80%. Fine tobe able to claim the interest but why pay more then you have too! Often with borrowing 80% depending on the bank you then also do not have to pay a valuation fee to the bank. I am sure others will explain much better but that would be it in a nutshell.[
]
Different tool for a different job.
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