refinancing question

A

Anonymous

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From: Anonymous


Hi everyone,

I am currently paying off my flat with a variable rate, P&I home loan with a redraw facility. Once we pay off this home, we'd like to convert it into an IP, and buy a new PPOR. We'd like to keep the flat as an IP rather than sell it because it is actually a very good investment property. I have $155k left to pay off, which should be achieved by mid 2006.

I'm thinking of refinancing the loan to an offset account loan. Then when we want to buy the new PPOR, we use the money accumulated in the offset account for a deposit. That way, the money still remaining on my flat will then be tax deductible (since the flat will become an IP). It seems with this strategy that we'd achieve our goals of buying a new PPOR as soon as possible plus keeping the current flat as an IP.

My questions are:
1.Does this seem like the best strategy? The only other strategies I can think of are to pay the flat outright and then save another deposit for a new PPOR. Or we could buy the new house now while still living in our flat, and rent out that house for a while.
2. Who do I talk to to get more advice on this matter - an accountant or a mortgage broker? Rolf, can you help?

Cheers

Anon
 
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Reply: 1
From: Rolf Latham


Hi Anon

If you can stop paying P&I now or go back to minimum repayments do that as a first step.

You may have difficulty refinancing to an interest only facility where it is still owner occupied, with an offset facility though many a lender will do it if set up the right way.

Look for a product that gives you an offset account against even an interest only loan.

By reducing the debt more quickly as you are doing now all that you achieve is to sterilise the tax deductability of the future IP loan.

Take care though, much also depends on the rest of your financial situation as to what works and what doesnt.

Seek out the services of a good independent mortgage broker - your post suggests you are more knowledgable in the tax effectiveness issues of investments than most brokers and many accountants/investment advisers I know of.

Ta

Rolf
 
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Reply: 1.1
From: Russell Chellew


Hi Anon,

Refinancing existing home loan to an I/Only with 100% offset account is a good option.

There are quite a few lenders who will set up loan this way.

A 10yr I/O with a 100% offset is now available for both O/Occupy or investment loans.

cheers


Russell
 
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A

Anonymous

Guest
Reply: 1.1.1
From: Anonymous


Thanks Russell and Rolf for the advice.

I might be in touch with one of you in the near future to discuss further the options available for refinancing. Got to talk to my partner first.

Cheers

Anon
 
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