Hi folks
Seeking some advice from the finance experts here.
Here's the situation:
Married couple, late 20s, combined gross income $175k
About to settle on a $420k PPOR at 80% LVR. No other investments.
Current cash flow enables us to comfortably put in around $800 per week more than the IO repayments.
Initially we went to a mortgage broker for the sole purpose of getting finance. This mortgage broker also happens to be a financial planner. After going through our numbers, he has very strongly suggested we commence a debt recycling strategy with the view to paying down the PPR loan as quickly as possible. Based on all of the information he has provided, it looks like a sound strategy.
However, there is a chance we will have to upgrade our PPOR in about 5-7 years (perhaps a 50/50 chance). My initial thought in going into all this was to have an IO loan on the PPOR with the view to converting it to an IP and buying a new PPOR in order to keep the debt (and potential future deductions) as high as possible. Of course, we would be pouring extra money into the offset account during this time.
I put this to the broker/adviser and he seems to think that given the uncertainty about when/if the house might become an IP, we would be better off proceeding with the debt recycling strategy. If we do decide to convert the PPOR to an IP down the track and have paid down a good chunk of the PPOR loan, we may be doing ourselves out of future deductions, however, he seems to think that the benefits from a debt recycling strategy would far outweigh whatever the value of the potential deductions would be.
Does anyone have any words of wisdom here? I am liking the idea of the debt recycling in order to take advantage of our additional cash flow during the next few years, however, there is that voice of conventional wisdom in my head saying "stick with IO if there is the slightest chance it will become an IP".
Thanks very much
Seeking some advice from the finance experts here.
Here's the situation:
Married couple, late 20s, combined gross income $175k
About to settle on a $420k PPOR at 80% LVR. No other investments.
Current cash flow enables us to comfortably put in around $800 per week more than the IO repayments.
Initially we went to a mortgage broker for the sole purpose of getting finance. This mortgage broker also happens to be a financial planner. After going through our numbers, he has very strongly suggested we commence a debt recycling strategy with the view to paying down the PPR loan as quickly as possible. Based on all of the information he has provided, it looks like a sound strategy.
However, there is a chance we will have to upgrade our PPOR in about 5-7 years (perhaps a 50/50 chance). My initial thought in going into all this was to have an IO loan on the PPOR with the view to converting it to an IP and buying a new PPOR in order to keep the debt (and potential future deductions) as high as possible. Of course, we would be pouring extra money into the offset account during this time.
I put this to the broker/adviser and he seems to think that given the uncertainty about when/if the house might become an IP, we would be better off proceeding with the debt recycling strategy. If we do decide to convert the PPOR to an IP down the track and have paid down a good chunk of the PPOR loan, we may be doing ourselves out of future deductions, however, he seems to think that the benefits from a debt recycling strategy would far outweigh whatever the value of the potential deductions would be.
Does anyone have any words of wisdom here? I am liking the idea of the debt recycling in order to take advantage of our additional cash flow during the next few years, however, there is that voice of conventional wisdom in my head saying "stick with IO if there is the slightest chance it will become an IP".
Thanks very much