Well we have just become the proud new owners (pending finance etc) of a Cannington townhouse. I decided to man up and do it without TIC holding my hand and so far so good. Some pretty good interest rates around at the mo with Police & Nurses offering 5.89 fixed for 3 years, which leads to the next decision. With our cash contribution to the portfolio, I can actually afford to pay Principal and interest instead of interest only. So the question is should I find something else to do with the surplus or should I start eating into the principal of one property?
NExt question – PNCS have a great rate but $5K for lenders mortgage insurance for approx 88% lend seems exorbitant. Any ideas?
LauryJamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
It's been said before but I'm going to repeat – rate is far from the most important feature, particularly when dealing with multiple property ownership. Are you planning on purchasing more properties? Will you need to access equity in this property down the track? Have you considered all of the implications with fixing a loan?
It's hard to comment on the $5k LMI without knowing the value of the property.
With paying P&I on this one – do you have non-deductible debt elsewhere?
No I dont have any non-deductable debt at all. While the govt is providing me with accomodation I am pouring all my efforts into IP. I dont think I will be purchasing another for 12-24 months but the long term plan is a portfolio of about 6. I am not 100% sure whether I will need to access the equity. Definitely not in the short term but in the next five years, probably.
I accept that I might miss out on future rate drops but when I can get almost 1% cheaper by fixing as compared to variable, thats over 10K per annum across my portfolio, which is significant. I would agree that it is easy to get too fixated on rates when we are talking 0.1 or 0.2% but the difference between fixed and variable is much greater than that and has significant impact on cash flow and lifestyle I provide to my family
Purchase price for cannington 415K, loan estimate depending on fees 360-365K
I am also considering whether I should bring all of my properties to one lender or keep them diverse – comments?
LauryDerekMember@derekJoin Date: 2004Post Count: 3,544
I am not one for placing all loans with one lender. It is very easy for the lender to gain upper hand in the lender – borrower relationship.
When looking at P & N CS make sure you find out how long their I/O periods are for. As an investor it is important you maintain flexibility and have maximum time yup your sleeve just in case your world goes pear shaped.
In terms of P & I on some of your portfolio – I would suggest I/O linked to your loans would be a better option. While you have access to work related housing at the moment. Is this always going to be the case? If you moved back to Perth I suspect you would need to provide your own housing at which time you will be grateful you can access the funds you have put in your offset account.
I/O in an offset account has the same effect as P & I but you retain maximum portability of your money.
PS Good job on CanningtonJamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
I agree with Derek with keeping the loans IO. Have an offset against one and park your spare cash in that. That will achieve the same result as a P&I loan but will provide added flexibility down the track if you do take on non-deductible debt.
Fixed rates aren't 1% cheaper.