Forums / Property Investing / General Property / Scenario Advice Please?

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  • Profile photo of ijcijc
    Participant
    @ijc
    Join Date: 2002
    Post Count: 28

    Hi- I have just paid off my PPOR and I have 2 investment properties. First I've held for approx. 8 years on interest only. Loan is $305,000 and current market value approx. 370k. Second I've held for approx. 3 years io. Loan is $385,000 and mv approx. 370k(victim of the double dip). My current interest rate on each loan is 5.88% variable. Last financial year the repayments on the 385k property were killing me, and zero capital growth, possibly neg. My plan is to keep the faith :) and keep the props for at least 5+ more years.

    Now the PPOR is paid off I'm wondering if I should convert one or two properties to principle and interest loans and start getting into the principle, and/or possibly fix the interest rates for a 3 year period at 5.38% or 5 years at 5.79%. I have no other debts like credit cards or personal loans and don't intend getting any. Any advice would be most appreciated.

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Hi there,

    Where are your properties located?

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    Any chance you would need to upgrade the current PPOR or need large amounts of cash?

    I would generally perfer to keep them IO with an offset account for the extra – but only if you are discriplined.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of ijcijc
    Participant
    @ijc
    Join Date: 2002
    Post Count: 28

    All three props are on the Sunny Coast. No need to upgrade the PPOR and no need for large amounts of cash. The offset account idea could work but the interest rate is higher on the loan to have this facility, which may negate a benefit. I was wondering if you are not paying off a PPOR does it actually make sense to start paying down one of the other debts, and if so, which one of the two. Not sure what others do in this position?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    There is generally no harm in paying down debt. You will get a guaranteed 6% or so return.

    Another consideration is borrowing ability – if you pay it down now will you qualify for new loans in the future?

    If all properties are owned by the same person(s) then it generally has not effect, taxwise, on which you pay down. But from a lending POV you may want to pay down the highest LVR first as this may make it easier to move banks later if required.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 11,992

    As Terry has mentioned as long as you realise once you pay down the debt if you need the funds back the interest wont be deductible.

    I decided 17 years ago to pay down all of my IP debt and must admit i do enjoy the monthly cash flow.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of ijcijc
    Participant
    @ijc
    Join Date: 2002
    Post Count: 28

    Thnx Guys for taking the time to respond. I'm thinking now with the new info that I should fix the interest rate for 3 years on the IO 385k prop as I just can't afford the higher rates. Fix the rate on the 305k prop for 3 years too, and the IO reverts to P and I in 1 years time, ending my second 5 year IO contract. At that time pay P and I payments on this prop. Maybe take up the option of an offset account approx. 2 years after that when the fixed interest period expires. I can weigh up my options re the 385k property after the IO fixed rate 3 year period expires. Does that sound feasible? Have I missed anything? Cheers

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