Advice on first IP

[Kmoney]

Hello all, first time poster but have been reading forums for a bit.
Like to ask advice on current situation:

Purchased PPOR 6 months ago, halves with brother (Separate loans). House bought for 500k, for my 250k share I had a 50k deposit.
Initial Loan amount: 200k
Amount in offset: 30k
Loan remaining: 170k
Variable loan at 5.2%
Approx increase in house value due to minor renovations and growth: 4-5%
House located in Perth, 4x2, 7km from city.

Am interested in purchasing an IP, my long term strategy is to buy and hold. Currently looking at investments worth 300-350k in Bendigo, Victoria, as I grew up in the area and still have close family around.

Should I use the equity built up to buy an IP now, or hold out for say another 6-9 months and continue to build equity? I'm currently adding 3k/month into the offset account which leaves plenty to live comfortably.

Thanks in advance for any advice or tips.

Cheers.

K.

 

[Rolf Latham]

Hi KM

Welcome

The joint loan thing wont be helpingyou middle term, since most ( but not all) lenders see the loans as joint and several liability.

everytime you go to pull some equity, the co borrower will need to guarantee and vica versa.

As to the next IP, a lot will come down to your incomes and other liabilties, you have enough equity and savings to do it, just need to make sure you structure it the right way and dont use the "straight savings"

ta

rolf

 

[Kmoney]

Thanks for the quick reply Rolf.

My other liabilities are minimal, minor amounts on a credit card, and an average car etc. Income is very low risk, in job for 4 years and not likely to move in short term.

In regards to structure, I'd be going I/O if I were to proceed, but am unsure as to what you mean by not using straight savings?

Many thanks,

K.

 

[Rolf Latham]

\

In regards to structure, I'd be going I/O if I were to proceed, but am unsure as to what you mean by not using straight savings?

Many thanks,

K.

if you have 30 k on offset and your current loan is 170, create 2 loans

140 non ded

30 deductible


use your cash to repay the30 k new loan split and then redraw for the IP


reduces your non tax ded debt by 30 k

Seek specific tax advice though pls

ta
rolf

 

[Colin Rice]

May want to consider going intrest only (if not already) on the remaining loan of 170k or is it 200k?

 

[Kmoney]

Sorry guys, I should've clarified better, loan is sitting around 198k, or 168k taking into account money in offset.

Colin, what advantages would there be in going I/O on the current loan?

Thanks for your replies guys, appreciated.

K.

 

[Aaron_C]

what advantages would there be in going I/O on the current loan?

It preserves the loan balance so you can maximise tax deductions. Any excess cash you would be putting into P&I can be put into offset to reduce the balances.

 

[Rolf Latham]

IO can also improve the serviceability with some lenders for future purchases since current outgoings are reduced

ta
rolf

 

[Colin Rice]

Colin, what advantages would there be in going I/O on the current loan?

As above from Rolf and Aaron

If you convert it to an IP in the future you will be doing your self a favour by going IO.

Depending on what bank you are with it can be very simple tick and flick (Bankwest for eg.) or may require a little more effort but still worth it.