Hi Everyone,
I want to know what people think is the best strategy, start investing now or pay off own home first? I am leaning toward start now, but I am not sure if I should try investing when I still have a lot to pay off?This is a great question and a tough one to answer in the current climate / property cycle.
When prices are on the rise, its a good idea not to worry too much about the PPOR. You can borrow on an investment property and pay interest only. As the investment property increases the loan on the PPOR does not seem so high.
But in this climate you need to worry about the negative payment (if you invest in the surburbs of the city – thats what i do – not regional or rural) and the prospect of growth is a little limited for the next 3-5 yrs.
Get off the fence. Ok, If I could afford the interest only payments a new investment property and was on the highest tax bracket I would buy now and dream of the tax refund you get at the end of each year.
As the years pass, the amount on the PPOR will seem so low and you will wonder why I even worried about it.
You can do both.
If you have spare cash, pay off your home loan and then reborrow the money to invest.
This way you are reducing your non deductible debt, increasing your deductions and getting hopefully higher investment returns.
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
Hi Scullie,
It all depends – how long have you got left to repay your loan off? How much have you paid? How much equity do you have in the property and is this enough to service deposits for other properties. These are some of many questions you need to ask yourself. If it was me and I had only a little while to go to pay off my PPOR, I would do this first – that way you secure something that banks cannot take away from you.
Also in my view, it’s always best to not delay – if you found a good deal, then I would find a way to get hold of it – the choice is your.Hope this helps
Kind Regards,
George.I’ve found a way to help you save and earn whilst not selling or delivering any product. If interested, drop me an email or PM me to find out how
Welcome Scullie,
more info on your situation would be helpful to give more specific advice, like mortgage amount – house value (equity), any savings you might have, how much the new place would be (approx). This is the kind of info most of the forumites work of to see if the risk is accepteble to them.
Something to help you make up your mind is, that interest on PPOR (you home, you live in) is NOT TAX DEDUCTABLE where as tax on any investment (ie: borrowings for investment purposes) IS TAX DEDUCTABLE!
So from Yack:Get off the fence. Ok, If I could afford the interest only payments a new investment property and was on the highest tax bracket I would buy now and dream of the tax refund you get at the end of each year.If you income is high (therefore pay lots of Tax) it might be in your interest to purchase an IP and use it for Tax Consessions. A strategy that you might want to consider.
If your income isn’t so high, you might want to put off buying an IP until you are more flush with funds (ie:equity or savings).Hope that helped some
Cheers
C@34
I find most investors don’t delay their start. The ones that do generally regret it at a later date.
I know I wish I had started earlier.
In 10 years time you will look back and see a significant rise in the value of residential property. Perhaps one idea is to purchase IP’s with the view of one day selling to pay out any PPOR debt you may have.
Is the PPOR you are in the one you will be in for life? If not – why pay it off at all?
Just some thoughts,
All the best,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985NODOC Loan – 65% Loan – No questions asked!
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks to everyone who replied, to add some more information, I paid 400 for current house, I have 264 left to pay. When I do buy an IP I want it to make money, therefore positive gearing. Income is quite high, top income tax bracket. Already have a car leased to try to reduce huge tax. Want to stay in this house for a long time. My biggest worry is that interest on current house is non deductible, therefore any return pales when compared to paying off the home. So i find it hard to think that I can somehow buy an IP before paying off the house. There has to be a way to do both.
I did recently.
Buy a pos cashflow place on an IO loan. Borrow 100%+ to do so. Divert the cashflow into an offset account on your home loan along with your wage.
This will make a significant difference.
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985NODOC Loan – 65% Loan – No questions asked!
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
OR – You can do what i have done in the past.
Bought a 2 bed unit near my PPOR on interest only 100% geared using PPOR as cross colletral. Cost me about $600 a month. Got a tax refund of $4000 per annum. Put that on PPOR.
As property grows you can decide whether to sell investment or keep it.
Great Scully,
@ 80% of your PPOR (no mortgage insurance) you could draw you loan to $320K (less $264 to go) gives you around $56K to invest. Using 20% deposit and 5% as closing fees you could be looking for an IP upto $220K.
Not too shabby. It’s an amount you could start looking arround for.Cheers
C@34
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