All Topics / Help Needed! / which place to pay off….

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  • Profile photo of BreakEvenBreakEven
    Participant
    @breakeven
    Join Date: 2006
    Post Count: 80

    Hiya PIs,

    Ive got a few investment properties in Brisbane. But Im not living in my own home, instead my wife and I are 'sacrificeing' our sanity by living with inlaws. Her mother has a big place so we occupy one end of it with our 2 small kids. As you can imagine, its a test for all. But since doing this we have been able to buy 2 more investment properties, so its paying off.

    All our properties in Brisbane are interest only loans (as they are investments). As we are not occupying a PPoR, I was wondering what you all thought about paying one of these places off. Maybe its just misguided instint, but I feel as though we should be paying off one of these places as we will eventually need to move into one of them, unless we buy our own place.

    We are currently in the hunt for our next place, and are debating whether this should be an investment or a home. Or whether we buy our 'future' home, that we can rent for a few years before moving in. Using any spare cash (yeah right!) to eat into the principal while its rented….

    Decissions decissions…..

    Im just looking for some more creative ideas here….??? Got any guys…?!

    Cheers
    BreakEven

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488

    My belief is that no matter what the purpose of the loan is for; investment or personal; if you have excess funds available to pay down the debt then do it. It will improve your equity and cashflow.
    Of course, it is good to still be able to have access to the funds again in the vent of an emergency, or to re-use for more investing, so the type of loan you have is important.
    Buying a PPoR is what everyone wants to do, but as you know, the interest on the loan for a PPoR is non-tax deductible.
    If you can stand to live with the M-I-L for a while longer, it would be better to select a house that you may like to use as your PPoR in the future, but use it as an I.P for now, thus getting some more lovely tax deductions from the interest as you go.
    I've had 4 PPoR's now; they come and go, so don't get too hung up on it being forever.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Why not structure the interest only loan with a 100% offset account on deposit all of your funds into this account to save you interest.

    You can then take your time deciding whether any of the eixtsing properties or infact a new property will be your PPOR.

    Swing the offset account over accordingly once you have made this decision.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of BreakEvenBreakEven
    Participant
    @breakeven
    Join Date: 2006
    Post Count: 80

    Thanks LA and Qlds,

    Both good points…. 

    Richard, you offered the obvious answer – I just couldnt see it.
    My loans are actually set up as 100% Offset, Ive just fallen into the trap of not utilising this properly.

    For some reason, I was thinking that the offset only affects the interest and that I couldnt refinance for lower repayments.
    Obviously by playing around a bit this is possible…

    Cheers
    Breakeven

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