All Topics / Help Needed! / Should I use equity?

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  • Profile photo of elbowgreaseelbowgrease
    Member
    @elbowgrease
    Join Date: 2004
    Post Count: 22
    March 30, 2004 - 12:35 am

    Hi guys I’d appreciate your opinion on this one. After I sell my current ppor in about 6 months (after finish reno) I will have approx $350K in bank to buy another ppor (about $300K). I then want to buy as many IPs as possible but am not sure if it’s best to draw down the equity in ppor to use as deposits (as I’m then paying interest on amount drawn down from ppor, but have less to pay on IP loans),

    OR

    buy IPs at 100% finance and just offer my ppor as security, (so am only paying interest on IP loans, but they are at 100%).

    Hope that makes sense? Am trying to work out which way I’d be better off (ie: which way I’d be able to have the most IPs), or are they the same in the end?

    Thanks.[confused2]

    Profile photo of geogeo
    Member
    @geo
    Join Date: 2003
    Post Count: 1,194
    March 30, 2004 - 12:48 am

    Hi there,

    you said that after selling, you will have $350k but are looking for a PPOR for $300k. This means that you will have an extra $50k. By doing some good research, you could buy 3 good investment properties with this 50k as deposits for them. I would start out with these 2 or 3 investments for the time being until you get the hang of it and know what your putting yourself into. Don’t try to buy as many as you can in one go – it will backfire on you.

    And don’t try to use your equity now. You have 50k left over – use that. then if yu find good deals later on, you can withdraw your equity.

    Kind Regards,
    George.

    “If You never never ask, you’ll never never know”

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781
    March 30, 2004 - 12:52 am

    If this will be a permanent PPOR then pay cash for it.

    If you will convert it to an IP and buy another PPOR then take an 80% lend on it and lodge the cash in offset.

    This preserves the tax deductibility for the time it will be rented out.

    Cheers,

    Simon Macks
    Mortgage Broker
    http://www.mortgagehunter.com.au
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of GeronimoGeronimo
    Member
    @geronimo
    Join Date: 2002
    Post Count: 167
    March 30, 2004 - 2:01 am

    Elbowgrease

    Why sell? Can you not keep your PPOR and leverage off that, or are you specifically looking to downgrade?

    Seems to me from an investment point of view that selling a PPOR (and incurring costs) to buy another PPOR (more costs) to leverage off is a costly affair, although I’m sure the OSR will enjoy the stamp duty!

    On the other hand if it’s an emotional decision and you really want to move, go for it, as all the money in the world can’t substitute for a happy family home.

    Brendon[biggrin]

    Acute Mortgage Reductions
    ‘Better Finance for More Homes Sooner’
    [email protected]

    Profile photo of elbowgreaseelbowgrease
    Member
    @elbowgrease
    Join Date: 2004
    Post Count: 22
    March 30, 2004 - 2:30 am

    Thanks geo that’s a great idea.

    Thanks also MortgageHunter. will be permanent ppor, so will pay cash as u suggest. Other option is good to keep in mind tho.

    Thanks Geronimo – want to sell to get cash, and pay off approx $380K owing. Also downgrading. Bought ppor to do large reno for profit purposes to get good amount of equity behind me to start investing.

    Thanks very much for the suggestions.[wink2]

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