Plese point me in the right direction!!

[nu2ips]

Hi all
Im new to all this investing (and using a forum for that matter) and would like to hear some opinions of my situation,

Have no current IP but I am trying to get there

Have PPoR bought for $300k 4 years ago and estimate the value to be $400k ( just based on what has sold around the place. 3bed 2 bath 1study and a few extras inc pool)

Current loan is split into 2 parts
1- P&I loan @7.34% (still on a honeymoon rate till 09) amount $228k
2- LOC @ 7.6% amount $50k limit
the line of credit varies as im am self employed and i use this part for all money in and out.


I have only just traded for my first full financial year 06/07 and still waiting to hear from accountant about how much tax owing.
I did a profit and loss showing net $42k. I have a partnership with my wife who works part time for a friend earning about $5k p/a

Now to my QUESTION,
Should i look at how our mortgage is set up so as to minimise commitment for repayment ??

Sorry if I sound abit crap at all the jargon but im am very new to this concept of wealth creation and i am determined to learn because ive just figured out the real cost if i do nothing about it.!!!!

Cheers.

 

[Bandita]

Hi nu2ips,

One of the main things to differentiate (spelling?? ) between in loans is deductible and non-deductible debt - it's hard to tell from your post, is that 50k in the LOC for an investment?

Regardless, it looks like you've got a property worth 400k, with a loan of $278k against it (including loan and LOC). If your property is worth $400k, you've got $122k in equity there - 80% of that (to avoid LMI - lenders mortgage insurance - which I don't necessarily think is a bad thing, but anyways....) - is $97,600 in equity.

Are you looking to buy another IP or use your equity for some sort of investment? The main goal is to always reduce non-deductible debt (bad debt) - which I'm not sure if your LOC is or not, as you mention a business.

I'm not exactly sure what you're asking for.....most investors here use Interest only loans for their Investments.....which is a whole other topic......are you looking to reduce your loan repayments, looking to use your equity to invest, looking to understand if you're paying competative rates.....not sure what you're after ???

Cheers,
Jen

 

[Dis]

Also self employed.

Talk to your broker / banker about setting your loan up for maximum tax efficiency. If I understand your situation right, you probably want something like this

Account 1:
Offset acount against mortgage.
All income goes into this. Mortage (and LOC interest) payments get taken out of this automatically. Money in this account minimises your non tax deductibe debt. Use the funds in this account to pay off all personal expenses.

Account 2
LOC.
All business expenses paid out of this. Interest payments are tax debuctible. If you have been using your LOC for personal expenses pay off your LOC so the tax man cant argue that you are trying to deduct against personal spending. Then let your expenses accumulate over the years. Dont pay them off. Pay off your house instead.

Account 3
Second LOC
You shoud be able to borrow an extra $42 k against the house. You can use this as a deposit against an IP or to invest in shares (should you wish).

Not advice, just a guess on something that may be suitable. Talk to your adviser regarding your goals and circumstances.

Dis

PS on your income I dont think I would want to take on extra borrowings even if the bank let me. I'm quite risk averse however

 

[nu2ips]

Cheers
thankyou very much for your input I suppose i wasnt quite sure what i was asking but will look at ppor loan structure.
by the way LOC is part of mortgage.
Ill be back on the forum with more questions just a soon as i figure out which ones to ask.
cheers again