Get a Mortgage or buy outright??

[murrayo]

Hi,

I am hoping for some advice / opinions from PI's regarding getting finance to buy a PPoR in the current climate.

In a nutshell;
house sale agreed @ $473 (negotiated from $530k)
needs an approx $80k reno.
we will get FHOG of $14k
I think we will not get the stamp duty waived? (as we have owned property abroad & we are now in QLD)
We are lucky enough to have $550k cash in the bank at present.
I need to borrow approx.$30k from bank to make up the shortfall for reno costs.

My question is this.....

would you pay say $250k deposit & leave the rest cash & get a mortgage,therefore giving easy access to cash to buy a 'bargain' should it arise?

Or buy outright & borrow against the house as & when the 'opportunity ' arises?

thanks in advance !

Murrayo

 

[murrayo]

Forgot to say - wife & I both work part time & have approx combined income of $75k ish

Thanks !

 

[silversands]

I would borrow as much as possible and leave all my cash in an offset account ready to use whenever i want. Nice position to be in really!

 

[Bradsdad]

You say it's a PPOR. What if you decide to rent it later down the track? The extra debt could come in hand against property then whilst still having cash in offset facility.

 

[Rolf Latham]

To qualify further whats already been said.

The reason youd borrow to the max capacity, and place your tax paid cash into an offset account .

1. Challenge or opportunity. If you suddenly need some big cash, it may not be possible at that time to pull the cash back out of the equity because the lending climate, or your personal circumstances have changed.

2. Possible tax issues. If you buy the place outright and dont have a loan, when you next turn it into an IP and want to buy a new PPOR you may end up paying full income tax on the rental income AND have a large non deductble debt on the new PPOR

There are some other peripherals such as asset protection that may also come into play.

You are in a unique and strong position to move forward from. Use that position I reckon.

ta
rolf

 

[murrayo]

Thanks,

But the money in the bank would gain interest (that would then be taxed) , & I would then have a monthly Interest Only loan of $1300 ish I think + the costs incurred setting this up ($2k ish?)

Seems an expensive way to do it , no?

On the other hand - inflation could do a bit of damage to the outstanding loan over time , which is good...

And if Interest rates are tipped to rise & I have $250k in the bank and a fixed rate mortgage....

We plan to stay in this property for a LONG time & never turn it into an IP (but admittedly - you never know!...)

As for asset protection - good point (& it has been dealt with - so not an issue now, thankfully.)

Surely if we have a 50% loan to value ratio , & the property has been improved to increase this still - ie after the reno - it should be 'worth' $600-$650k , with an outstanding $250k loan , it will be OK to borrow? Is it THAT tight out there?!




This is wrecking my head !

Thanks again !

ps. what if we buy outright now & get a LOC organised very shortly after moving in & renovating??

 

[Rolf Latham]

Hiya

If properly set up.

The loan will only cost you payments on the funds that are actullay used. So wont be 1300. Youd effectively only pay interest on the 30 k.

WOnt cost 2 k to set up either unless you are using someone that charges upfront fees. Most pro packs are under 400 bucks per year, and there are no more Stamp Duties on the mortgage in QLD . Setting up a loan for 30 k is hardly worth the stress and certainly wont save many dollars I dont feel

Easy decision. On the above data, there is nothing much to loose I would have thought.

Do it, then its done.

Borrowing AFTER settling is ok if all the funds are used for investment purposes, but does not provide any tax benefit against the property income from rent that you may get from your property in the long term.

Intentions change.............sometimes rapidly because circumstances well beyond you force you.

Old Maxim says borrow when you dont need it, for when you truly do need it, no bank will lend it to you.

You have a bunch of key indicators which suggest you are target market for a later upgrade, the primary ones being you are cashed up and FHOG eligible.


ta
rolf

 

[tobe]

Have they abolished stamp duty on mortgages in QLD?

 

[michellem]

Have they abolished stamp duty on mortgages in QLD?

Abolished as of July last year.