Funds for IP deposit, or wait for PPOR

[SmiTTy2008]

Hi All

Need to get your thoughts on what my considerations are :

Situation : I've recently sold an IP and have approx 200k to play with. I want to buy a PPOR soon (in about 6 months),

Option A : Park the 200k in a high interest account for the time being, and use it as a deposit to minimise my PPOR debt. Totally forget about IP's for the time being (until i pay off my bad debt)

or

Option B : Buy a cheap IP (using maybe 40-50k of the 200k as a deposit). Then use the remaining as the deposit for the PPOR. I would be investing this through a family trust fund. I will obviously have less as the deposit.

Any other options, or factors to consider would be appreciated. thanks in advanced !!

 

[Terryw]

Think of the consequences.

$50,000 less deposit for an PPOR means a loan that is $50,000 higher. This means interest is higher every year. @ 7% = $3,500 pa. Think of the compounding effects too.

If you buy the PPOR first and then reborrow the $50,000 it would be deducitble for the truts (although it may not end up saving you much tax unless you trust has other income).