Wait for equity or spend savings

Viewing 10 posts - 1 through 10 (of 10 total)

Beebob
Participant
@beebob
Join Date: 2012
Post Count: 2
April 16, 2012 - 10:27 am
Hi all,
Bought our PPOR 14months ago, and have paid off $18,000 (Still owe $435,000) paying P&I.
We have $60,000 sitting in an offset account. Just wanted some advice on whether to whack it all on the mortgage and wait to hit the 20% mark then use the equity, or instead use the offset money for a deposit.
We have a combined income of $170000.
Pros/cons/advice would be hugely appreciated. If you need more info just ask.
Thanks!
bullet46
Participant
@bullet46
Join Date: 2011
Post Count: 51
April 16, 2012 - 10:30 am
Interested to see the replies as we are in a similar situation.
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
April 16, 2012 - 10:56 am
Hi Beebob
Will the next purchase be an IP?
If so, by placing the cash from the offset back into the loan and reborrowing it for the IP, you’ve made the entire debt tax deductible. If you used cash for the deposit/costs, it wouldn’t be deductible.
You’ll need to check with your current lender that you’ll be able to access those funds once they’ve been placed on the loan.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone Me
Mortgage Broker assisting clients Australia wide Email: [email protected]
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
April 16, 2012 - 11:22 am
Think it logically thru.
If you take th $60k out of the offset what will happen?
A: Your interest on the home loan will increase by about $4,200 per year. This won't be deductible because it relates to non deductible loan expenses.
Q: If you were to pay $60k off the loan and then reborrow it?
A: If the new borrowings were used for investment purposes then you could claim the interest.
Approx $4,200 in extra tax deductions. Approx $1953 saved in tax if on the top tax rate. This is each year too. Imagine how much sooner you could pay off your home loan with this?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Beebob
Participant
@beebob
Join Date: 2012
Post Count: 2
April 18, 2012 - 11:05 am
Thanks guys! Solid advice. I’ve got an appt with the bank next week so will hopefully have a good idea of where we stand.
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
April 18, 2012 - 11:59 am
Hi beebob
Just make sure they understand investment structures and are on the same page as you. A lot of branch staff don’t have a clue – it sounds harsh but it’s a reality.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone Me
Mortgage Broker assisting clients Australia wide Email: [email protected]
Aaron_C
Participant
@aaron_c
Join Date: 2012
Post Count: 65
April 18, 2012 - 1:41 pm
Not harsh Jamie – they really have no idea.
luke86
Participant
@luke86
Join Date: 2010
Post Count: 470
April 18, 2012 - 2:10 pm
Hi Beebob- may i suggest you call Jamie for a chat. Some bank people dont have a clue when it comes to investment loans, and to be fair some are very skilled at this type of loans.
If you cann Jamie however, you can be assured that he is knowledgable and skilled at setting up investment loans correctly and can save you lots in the long term.
Cheers,
Luke
luke86
Participant
@luke86
Join Date: 2010
Post Count: 470
April 18, 2012 - 2:11 pm
call Jamie rather, not cann!!
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
April 18, 2012 - 11:05 pm
I agree give Jamie a buzz and get it sorted properly.
Think how much a mistake at your local Bank could cost you over the years when your Bank Manager has moved on and you are arguing about the loss of deductible interest to some spotty faced teenager.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender