Interst only loans and Stamp Duty?

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From: James Wallner


Dear All,

2 quick questions:
1/. Have just taken out an interest only loan at 5.49% for the next 5 years. Was informed can only get it for this period and then MUST revert to an interest and principle loan. Can not renegotiate another interest only loan. Is this the norm for IP loans, or at the end of 5 years do I need to take my loan elsewhere for another interest only period?
If I pay principle my cash flow is affected significantly and will prevent me buying again for several years (according to my reading). Is my thinking right to pursue interest only for as long as possible?

2/. Have bought in the ACT and was told by an 'unexpert' that my property stamp duty was deductible from my 1st years income. I have checked the ATO website and got the booklets, but it appears stamp duty is simply added to the base cost of the property and then simply reduces the capital gain. Before my appointment with an accountant thought I would try and equip myself with some knowledge so I don't sound like the novice I am. Are there any special rules regarding stamp duty in the ACT?

Many thanks,
James
 
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Sim

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Reply: 1
From: Sim' Hampel


Indeed, in the ACT I believe property is actually bought under a "leasehold" as opposed to "freehold" elsewhere. Word has it that this does indeed mean that things like stamp duty are deductible in the first year for ACT IPs...

Would someone from the ACT like to verify this ?

 
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Reply: 1.1
From: Frank Shead


There is away you can get out of your mortgage quicker, by pay interest only. Normal 25 year loan on good income can be reduced to say about 9 years.
If you are using NG to about 6 years.
Then you can buy more IP

Frank
 
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Reply: 1.2
From: Frank Shead


There is away you can get out of your mortgage quicker, by paying interest only. Normal 25 year loan on good income can be reduced to say about 9 years.
If you are using NG to about 6 years.
Then you can buy more IP

Frank
 
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Reply: 1.2.1
From: Robert Forward


Hi Frank.

How about expanding on your comments. This is a "helpful" forum where we ALL give suggestions etc on how to invest smarter.

So how do you suggest bringing a loan term from 25 years down to a 6-9 year term?

Is it a simple thing like having an offset account, nothing smart in this really. It's a stock standard loan account now. So how about sprouting your knowledge and helping others out.

Or do you charge for this information in a seminar?????

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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Sim

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Reply: 1.2.1.1
From: Sim' Hampel


Nah, he's just a mortgage broker who wants you to come and meet with him so he can sell you his services.

 
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Reply: 2
From: Denise Macadam


Hello James,


I am very interested in a response for James.W. to part one of his question!
Good question James, I find it so hard to get excited about the Financial side of these deals, and I know its the most important aspect - I would much rather be out there looking at properties,slapping some paint around,or doing a bit of damage with a hammer! - do any financial Guru's have some feedback on this for James/me/All of us?
Many thanks and looking forward to some words of wisdom from those in the know.

Good Luck James
Regards,
Denise
 
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Reply: 2.1
From: Steve Piggott


Hi Frank.. you mean work like a maniac and pay out your mortgage and then in 6-9 yrs you can buy another one??? If this is your strategy then what about your lost opportunity cost and the dead equity created in the property? Please read my post in 'high LVR'. However if you are a bank/financier... then its good for business... more money rolling in! But it doesnt assist the investor.
The skilled investor uses compounding , leverage and control. Money into my PPR is therefore wasted and not used to its best potential. Leverage your money into a wider asset base of property ... dont seek to own any ... just make sure you are in control of them eg your name/entity is on the title and watch them compound in growth! This is the simplest and most effective advice i've received and implemented.

If none of this makes sense then the property investment scene is not for you.

Happy Investing. Neb :)
 
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Reply: 2.1.1
From: Sergey Golovin


James,

"Is this the norm for IP loans, or at the end of 5 years do I need to take my loan elsewhere for another interest only period?"


Yes, some people done it before - to take your loan elsewhere.
.
Looks like you need someone who is good with finance - mortgage broker perhaps?

Serge.
 
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Reply: 2.1.1.1
From: Steve Kiddle


James,
1. My Bank manager told me that most lending institutions can only lock you in for a max 25 or 30 year term and in this time the loan must be paid in full. This means that they will let you have 5 yrs IO and then want to start getting some principal back. If they agree to IO without a fixed term they are effectively saying you can have their money forever. Obviously they cant say this but in actual fact, all banks that I know of will let you roll your loan over into IO at the end of each term. ANZ has done it for me numerous times. THe bank will not want to lose your business so they will generally do as you ask.

2. In NSW this mortgage stamp duty is claimed over the first 5 years (1/5 per year. I have heard it to be diff in Canberra

Steve
 
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