Buy another property or pay off mortgage?

C

Craiginqatar

I have a question for finance people. Is it better to buy another property or pay down the debt?

I have a mortgage for $80,000 on my Aussie investment property and $45,000 in cash at the moment.

Is it better to pay down the mortgage and the remaining $35,000 pay off over the next 12 mths and own the place outright or would it be better to buy another property with this $45,000 and leave the mortgage where it is?

At the moment the rent on this property covers the mortgage, insurance, rates, agency fees, etc with a little left over and it is always tenanted. I'm an Aussie expat so tax breaks and negative gearing are not good for me as i do not pay tax other than on the income from investment 1 which is negligable.

Your thoughts are appreciated.
 
Hi Craig

As s stop gap, I would do neither.

I would convert to IO, and pay all PI and excess into an offset acct.

Thenwhen you are no longer a golden handcuff Expat, you can use your tax paid cash to pay for your PPOR.

Ok, im making assumptions and taking liberties, but the strategy will give more options

t
arolf
 
Buy more. No point paying off current mortgage if it is cashflow neutral already. Do what Rolf said though too.
 
I agree with the others. There is no point paying off the mortgage if it is already being covered by the rent. You would not be applying any leverage.

Covert mortgage to IO if not already. Put cash and savings into the offset account and buy again as you are able (and want).
 
Paying off the mortgage is only good if you are absolutely certain that you will live in your current PPOR for the rest of your life (or at least, for the remainder of your investing life). Since all of us cannot predict the future, this isn't the best course of action.
 
Thanks for your quick responses and advice. It is most appreciated.

My Australian Mortgage is an offset mortgage which I have deposited an additional $35,000 into. I have no plans to live in the IP or to return to Australia at the moment and no PPOR in Australia.

I think I'll take your advice and look into a second IP and try and get a location and rent/mortgage situation that is as cash neutral/positive as I can.

This seems better than paying down the current IP mortgage as it pays for itself.

I was looking towards the UK where it is easy to get cash positive IPs, but it is very difficult to obtain finance there as an Aussie expat.
 
If this is all for investment, to maximise deductability, one possibility is to pay the money into the loan, then borrow it back again... (*many assumptions, of course!)
 
Hi Craig,

What's the property market in Qatar like at the moment? :)

Offset account would be hard to beat for flexibility, needs to be adjusted for lifestyle and personal preference though.
 
Craiginqatar said:
no PPOR in Australia.
Click to expand...


So I would assume at some point u may buy a PPOR in Oz.


Generally that means get the highest LVR you can ( probably 905) on your next purchase, ...........perhaps even using the equity with the property you have now.

Dont have enough of your hard or fluffy data so cant provide more than a Vanilla approach here.

Saving as much of your tax paid cash for your future PPOR purchase may save you 10s of k in Interest and taxes over time

ta
rolf
 
Aaron_C said:
Paying off the mortgage is only good if you are absolutely certain that you will live in your current PPOR for the rest of your life (or at least, for the remainder of your investing life). Since all of us cannot predict the future, this isn't the best course of action.
Click to expand...

Why would you do this? I don't understand the ppor being io?
 
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