TBut buy taking a 15 year loan instead of a 25 year loan making my loan repayment higher a way to negatively gear??
So this way i am paying the loan quicker without needing to pay tax on any profits. Not talking about massive negative gearing but enough not to be paying tax on this money that could be instead going towards the loan.. so instead of 50 cents in my pocket I'm getting $1 towards my loan.
You can only claim the interest as a cost so paying the loan off in 15 years will not immediately give you any change in how positive or negative geared the property is.
Additionally as you're paying down the principal faster, the interest component of your repayments will reduce faster so the negative gearing benefits will also reduce.
You also need to determine what the opportunity costs of the higher repayments are. Could you take lower repayments and put the money to better use?
I'd suggest a better strategy would be to go with a 30 year loan that's interest only for at least 5 years. Your mandatory repayments will be as small as possible. The benefits are:
1. You'll have more surplus cash and you can also add to paying off the loan, or you can put it to other use at your discression.
2. If you decide to maximise your tax deductions, making the minimum payments is the way to accomidate this.
Essentially this strategy gives you options. A 15 year principal and insterest loan commits you to a high mandatory repayment. An interest only loan has a lower mandatory repayment. You can still make additional volantary repayments if you wish (I'd do this via an offset account, but I'll save that for a different discussion).
A good reason why you might want this flexibility could be that you later decide to buy your own home. At that point you would divert all your surplus cash to paying down the non deductable home loan and only make the minimum repayments on the tax deductable investment loan.
Another example would be if you loose your job or get a pay cut. In this case it might be handy stop the extra repayments instead of being committed to the higher mandatory repayments of a 15 year term.