Have you paid off your PPOR mortgage?

[investor2009]

Oh! and PS. He also spoke about his large wage and I was very impressed and a little jealous. Don't remember what the job actually was? but thats beside the point. Forgot to add that, it's a crucial part of the story though.

So this nice guy (who was cool and I enjoyed talking with) had a great wage, had lots of holidays, had nice kids but not a clue about money, unless something unfortunate had happened, we don't know but they were on the 20th anniv holiday so it wasn't an expensive divorce

 

[nhg]

Most people I know will get close to paying off their ppor and then sell up and upgrade to a more prestigious suburb.

So they dont so much pay off their mortgage as they just get bigger ones.

 

[MIW]

But we also know that most people aren't very good when it comes to money so they'll end up working (most likely) past retirement age.

3rd one. ...We eventually started talking about our house and they didn't own a house but they did say they went on at least two holidays a year overseas.. They also said that if we had kids we wouldn't have a mortgage! they honestly believed themselfes and couldn't imagine any other reality. They also spoke about the Perth market sliding down and losing value, I said I thought the opposite was happening? But they said "No, a friend of mine has a house and it's losing value" Geez.. Nice people though

Interesting,
I was once at a seminar and the Contiki story was told by John Anderson (the person who started the company). He asked the audience who traveled there, 2/3 hands went up (except mine), who traveled there, again 2/3 hands went up (except mine), and there and there and there... and overall 2/3 hands went up (except mine)... At that moment I realised why my financial situation may have been different to most of these people now looking how to get financially ahead. It's the early sacrifices we make for the rewards down the line we get (delayed gratification).
Another one was when an industrial designer who did our joinery asked to advertise our house in a magazine for his resume. I met him,the photographer, and the editor who was writing the article and to my surprise all of these people did not own the properties they were living in...(they were renting!) Again my light bulb went on, it's the choices we make that create the situations we are later in life in... So I suppose it's irrelevant were they live or the titles they hold or where they have been as one of the sayings summaries it all,
"12. Average people live beyond their means. Rich people live below theirs."
As for the kids, well in our situation they were just the opposite, they were the drivers for us to do something more about our future... So please notice same problems faced can create a different result/outcome...so it's our mentality and attitude that really than makes us react/act and produces a different result!

 

[investor2009]

Thanks for sharing, this could be an entirely different thread!
I'm sure that would be interesting

 

[jackbak]

Interesting,
I was once at a seminar and the Contiki story was told by John Anderson (the person who started the company). He asked the audience who traveled there, 2/3 hands went up (except mine), who traveled there, again 2/3 hands went up (except mine), and there and there and there... and overall 2/3 hands went up (except mine)... At that moment I realised why my financial situation may have been different to most of these people now looking how to get financially ahead. It's the early sacrifices we make for the rewards down the line we get (delayed gratification).

MIW, your making it sound like travelling overseas and being wealthy are mutually exclusive. You can certainly have both just make sure you live within your means. My life wouldn't be the same if I hadn't traveled and I've gained so much by spending time in other cultures, you could say it's made me 'richer' but certainly not in the financial sense. Heading back to Europe for a month in August and I cant wait!!

 

[investor2009]

I agree, but what we're trying to say is that at first you have to live below your means (if you want to succeed bad enough) then, once assets have provided a profit and are underway then you can go out and enjoy
Life is for living but theres a balance

 

[cimbom]

MIW, your making it sound like travelling overseas and being wealthy are mutually exclusive. You can certainly have both just make sure you live within your means. My life wouldn't be the same if I hadn't traveled and I've gained so much by spending time in other cultures, you could say it's made me 'richer' but certainly not in the financial sense. Heading back to Europe for a month in August and I cant wait!!

I agree. I make sacrifices in other areas so that I can invest and travel as well.

 

[nhg]

I agree. I make sacrifices in other areas so that I can invest and travel as well.

It was my travels through Peru that led to my ‘aha’ moment about 3 years ago.

I was in Lima, at a newly released development and saw a window fall from a 10 story apartment, nearly killed a kid on his bike. As an engineer, I saw so many defects, I told myself I would work towards development and find a way to build quality buildings for cheap.

Truth be told I’ve deviated quiet a bit, though it has led to me investing in real-estate and working with an organisation overseas that builds sustainable buildings. Travel really can open new doors for you, as it leads to wildly new experiences. I could have purchased 2-3 properties with the money I’ve spent travelling yet I doubt I would have achieved what I had without it.

 

[china]

Life is for living but theres a balance

I have trouble defining balance.

Due to uncertainty about the length of time on this planet, how do you price what should be spent for enjoying the present versus saving for delayed gratification. Do you give it a ratio? 50/50 ?

 

[nhg]

I have trouble defining balance.

Due to uncertainty about the length of time on this planet, how do you price what should be spent for enjoying the present versus saving for delayed gratification. Do you give it a ratio? 50/50 ?

It is all relative Such a cliche answer with so much truth.

Read a book called 'Be excellent at anything" by Barry Schwartz.

The whole book is about repleneshing energy and taking life in sprints. It is not some big rush to an end goal, end of the day, you can always have another goal, but you can't always get back the time you spent achieving it. Use it wisely.

 

[investor2009]

Good q China. For me, to have the life i want to live I require time, and money. If I don't have these two ingredients I eill work my life away with a few holidays inbetween. So I work now like a normal person. Take hokidays like a normal person, but will make it out of the rat race 35 years earlier. Thats how I see it.

 

[Liberator]

I have trouble defining balance.

China this is something I struggle with.
I don't go for astrology but I think of the scales for Libra as an analogy... weighing up different options. The trouble is it can lead to analysis paralysis.
This is all coming to a head for me as my uncle (dad's side) has just been diagnosed with bowel cancer. Unknown prognosis currently - they'll know more after surgery next week. His sister died of cancer around a decade ago. My mum had breast cancer but has passed the decade mark so all looks good there. But I am torn between 'just go for your dreams right now because who knows what's around the corner' and 'set the basis now through sacrifices so you can have better security later on'.
I know my partner & I could be 'further ahead' if I'd made different choices (eg my salary is *way* less than it could have been because I have chosen to work in non-profit sector since finishing uni) but also I feel we are in a much more fortunate position than so many (PPOR effectively paid off in mid 30s, currently looking for an IP). So I also struggle with the balance between wanting more and feeling like we already have a level that is more than we ever expected at this stage of life.
And even though I've recently had some opportunity to pursue a specific dream, I am stalling on taking the (fairly straightforward) steps towards it... self-sabotage through fear/self-doubt??

Sounds like the book nhg suggested could be just what I need at the moment!!

 

[BayView]

I have trouble defining balance.

Due to uncertainty about the length of time on this planet, how do you price what should be spent for enjoying the present versus saving for delayed gratification. Do you give it a ratio? 50/50 ?

The delayed gratification comes from the budget, and partly your attitude towards debt.

If you have the habit of paying yourself first (saving for investing) and spending the rest on living, then the delayed gratification will boil down to whether or not you are happy to carry consumer debt, or whether you want to pay cash.

Given that most of us here on SS are financially educated, it kills (me at least) to pay interest on non-deductible debt - consumer debt.

So, in your case it should be easy; take out the investing dollars, take out the living expenses, spend whatever you have left on whatever you want....and/or go for one of those you-beaut Harvey Norman type no-interest payment plans to get the goods sooner.

Me; I choose to not really have a time plan for most things....it just evolves.

Is that right? Probably not, but I'm an Aquarian, so I don't have the problem of having to weigh up everything over and over.

My wife is Libran (so is her twin sister of course) and they are both exactly the same; angst and hand-wringing over every bloody decision.

It's a good balance for us though; she counter-balances my impulsiveness, and I get her out of the analysis paralysis.

 

[evee1]

Hi, since this thread is about paying off PPOR mortgage I'd like to share our story. We are in our mid fourties with two teenage kids. We bought our first house in 1994. After two kids that came in quick succession we decided to upgrade to a bigger house and in 1997 we bought a block of land and built a house. The house even for the standards in those times wasn't very big (21.5 sq of living), but to us it was \
Since both me and my husband are on the similar salaries, I have decided not to take too much time off work. Kids went to creche and I don't think that they were very unhappy. I was very tired, true, but at least out family budget was not suffering.
In 1999 we first came across books by Jan Somers and started to do the sums and decided to dive into all this. Shortly after we bought our first IP.
We decided that the best way to increase our chances of paying of the mortgage was to increase our earnings. So we packed our suitcases, rented out the house and off we went to UK. Living off one salary there, sending the second one home. After three years we were PPOR mortgage free and anxious to get back home. Which we did. Since then we bought another IP, which now is getting ready to be developed into two units (working drawings in progress).
I know, it has not been a very quick process, but juggling family, work and social life (yes, we have one ) does not leave us with much more time on our hands. So I suppose we were quite lucky with our choices, but there was also hard work involved.
And we still live in our house we built 15 years ago. No plans to upgrade, don't really see the reason why.

 

[grantwhit]

I don't get it.

Say you had a $500,000 PPOR loan which is no deductible.
You pay the interest on this loan.
You earn more money than the interest so you would probably keep this in the offset account.

When you buy a property you borrow against the equity in the PPOR.

So far so good,

but what if you wanted to invest with the money in your offset?

You would be losing tax if you just took the money out of the offset and invested it.

You would be far better off to pay down the non deductible debt and reborrow it.

eg you had $100,000 in the offset
You took this out, your PPOR loan interest would be about $6k pa more
or
You paid down your PPOR loan and then reborrowed $100,000 to invest.

Overall loan amounts the same but you have just increased your tax deductions by $6k pa.

What am i missing here? You've had to come up with an extra $6000 to save $1500 at tax time?

 

[Terry_w]

What am i missing here? You've had to come up with an extra $6000 to save $1500 at tax time?

No, $6k is the interest either way. With the second method the whole $6k is deductible whereas the first it isn't.

Where did you get the $1500 from?

 

[investor2009]

Here's something for you all to take a look at. Apparently 55% of all those aged between 45-54 have a mortgage, don't know if those others not listed are mortgage free, renting and/or other

http://www.getrichslowly.org/blog/2012/04/18/why-you’ll-likely-need-less-in-retirement/

 

[grantwhit]

No, $6k is the interest either way. With the second method the whole $6k is deductible whereas the first it isn't.

Where did you get the $1500 from?

$1500 tax return (roughly).

It's all just clicked in my head, I missed the increase in non deductible interest when the cash is removed from offset acc. Amazing how a nights sleep can clear the brain

 

[weg]

Here's something for you all to take a look at. Apparently 55% of all those aged between 45-54 have a mortgage, don't know if those others not listed are mortgage free, renting and/or other

http://www.getrichslowly.org/blog/2012/04/18/why-you’ll-likely-need-less-in-retirement/

I would have thought it would be higher than that.

Many that age are on their second, third or even fourth+ mortgage.

When we sold our last PPOR (which was paid off) we put a 75% deposit on the house we live in now and took on another mortgage, albeit nowhere near as big as a FHB's.

Friends recently did the same thing - sold their paid off PPOR and bought another and now have a new mortgage.

In their case the kids are mostly financially independent (less private school fees x3) so they can afford it comfortably, and in fact they are currently OS on a 2 month holiday.

I don't know too many that haven't done this to be quite honest, but depending on the demographics it could very well be different elsewhere in that age group.

 

[kereninotech]

I thought it was always great to pay off PPOR ASAP. So what i did before two years was put as much as I can to the loan, around $120K in two years (extra repayment), I didn’t have offset account before. It felt great as the loan was going down faster Then in 2011 I decided to refinance. When I refinanced the 120K was gone, it wasn't redrawn. I refinanced with a new lender with what was left on the mortgage. This time the home loan account have 100% offset account. Since 2011 I was putting everything on the offset account, now around $110K.

Then 2013, things started to get interesting, time to buy IP-1

PPOR
- PPOR Valued by Bank $500K
- Loan A (Bank A) = $245K
- Offset (Bank A) = 110K
- Loan B (Bank A) = $110K (Split loan Deposit + Some buying Cost for IP-1)

IP-1
- IP-1 Valued by Bank $475K
- Loan A (Bank B) = $380K

Now from my understanding I can claim TAX deduction on Loan B (Bank A), as the purpose of the loan was to get IP-1?

My understanding from pre 2011 NO offset (extra repayments) helped me get IP-1 and Loan B (Bank A) is now TAX deductible. Ok all Good but now I want to get IP-2, how will offset (Bank A) help me get my IP-2? Obviously I want it to be TAX deductible as pre 2011 money.

If I borrow more to Loan B (Bank A), LVR on PPOR will probably hit 80% and have to pay LMI..i did not pay LIMI before why should I pay now?

What is Offset (Bank A) doing for me except offsetting Loan A (Bank A), I want to get IP-2? How it is helping me with my investment strategy?