We have found out that we have enough equity in our current home to get a loan for another. Do you think we should save up 20% deposit therefore only borrowing 80% or forget about the deposit and borrow 100-110%?
It depends entirely on your timeframes and comfort.
But for tax effectiveness borrow the deposit as well and pay what you save into your PPOR loan.
Maximise the IP debt and minimise the PPOR debt.
I can explain further if you wish,
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I agree borrow the entire amount and use your savings for two things:
– the investment into other properties
– reduacing your loan repayments off your current loans.“If You never never ask, you’ll never never know”
Hi Paul,
I would certainled go with ‘use the equity’ approach rather than save the money. This way you can leverage the lowering debt and increasing value of your home into an investment portfolio – this approach puts paid to the myth that you need cash for a deposit.
Imagine buying a $200K property.
You will need approximately $52K for deposits and costs – less if you are using LMI.
The key issue is how long will it take to save $52K with after tax dollars? How much has the property market changed in this time?
Derek
[email protected]Read my comments? Think I can help you? PM or email me.
It depends entirely on your timeframes and comfort.Timeframe – My partner and I are young, 25 years old
Comfort – Want to sleep at night.Don’t you think saving 20% of the deposit would work out better in the long run, less interest paid on the loan, no insurance costs etc?
Paul
Think of how much non deductible interest you would save by putting that 20% deposit off you home loan instead of your IP (where interest is deductible). The overall balance of the loans would be the same.
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
Thanks for all your posts. As you probably can tell, I’m new to all this and here is my situation:
We live in a two bedroom townhouse but want to upgrade to a three bedroom house. We have enough equity to borrow for %110+ of a loan and this new home will become our PPOR. Our old townhouse will become our IP but still have a loan on it.Paul,
If the new place is to be your PPOR then change your current loan to IO and start saving a deposit. By all means buy it now using equity but only pay down the PPOR loan.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Simon…your a wealth of knowledge…you should write a book[grad]
“If You never never ask, you’ll never never know”
Simon – what is a IO loan?
IO = Interest Only
It means you aren’t paying down the principal amount. You shouldn’t pay down any deductible loans until the non deductible ones are paid out.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Use your money for an investment or someone elses.
Ummmmh?
rather use someone elses.
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