Second IP (new investor)

Hi,

I am a new investor. I bought my first unit at 127k, with a loan of 112k currently remaining. The unit is valued at 187k.

I am new to investing but constantly read magazines, articles and i research everything. I am new to certain terminology however i am gaining some idea by researching the words.

I am currently in the process fo changing employers. Full time $777 gross weekly. There is no probation period and my new employer is willing to sign off on that. My partner earns 45k per annum and has also just changed employers. We start on the 2nd August.

We have approx 10k deposit and want to purchase up to 250k.

He has a 23k debt and i the loan etc. No credit cards or other debts.

But we do not know how long to wait and i do no want to make too many enquiries as they count on the credit report.

I do not want to sell the IP unit.

The unit is on a fixed rate due to expire 30/11/2010 @ 8.09% (which before GFC was good, apparently) So i do not want to break and re finance that as i do not know if that is in my best interest, and i do not want to ask a bank for advice.

Anyone know how i can go about buying a property, it will at first be PPOR then a year or so IP as we have to move for his work.

J
 
Couple of considerations but in essence look to access equity on your current property through your existing lender to cover a partial deposit and acqusition costs.

Then Jointly look to take out a standalone loan on the new property.

If his debt is for non investment purposes with non deductible interest i would look to pay it down as quickly as possible.

Keep you new loan Interest only with 100% offset so that you maximise the Tax deductions once you move out and make it an IP.

Assuming that you qualify for the FHOG I would not use these funds to reduce the borrowings but place the money in the offset account.

Your Broker should be able to structure the loan for you correctly.
 
Talking to a mortgage broker will be a good place to start, they will give you a much wider perspective than one lending institution might do.

Lots of interesting little considerations like cross collateralization (do a search on that!) that you might not even find out about otherwise.
 
Ok so collateral on one loan is used for collateral on another. But does that mean i have to stay with CBA? I wanted to shop around.

I know about the debt he has to get down. He got a credit card when younger and spent up on it. Paying for it now, well we both are and i never got one!

I decided to now live in it as PPOR but to simply have it as a IP/
 
What Qld007 suggested included was doing somethig like this.

Increase your mtge to 80% of your current property value, it will be a separate loan.

Use funds from this for deposit and purchasing costs.

Use another loan, from another lender usually, for the remaining purchase price.

Put FHOG if you qualify into an offset account against one of the 2 loans

I think
 
What Qld007 suggested included was doing somethig like this.

Increase your mtge to 80% of your current property value, it will be a separate loan.

Use funds from this for deposit and purchasing costs.

Use another loan, from another lender usually, for the remaining purchase price.

Put FHOG if you qualify into an offset account against one of the 2 loans

I think

Jaycee, could you please explain to me the advantage in putting money into the offset account against the mortgage, instead of paying a lump sum into the mortgage?

I still don't understand it as I have never seen any figures on how it works?

Thanks,
Daniel
 
Thanks Jaycee that was very Spot on!

Mydad and i doing the leg work to look at investing together. He is going to my invester buddy as no one else in my family is keen on property.

No sure i want a ring yet at 23 :( Maybe later :eek:

But yeah i would have legal implications if i am not married?

He has debt no property. But i would prefer to have a long term partner and build a welathy portfolio. I can see the financial sense and the emotional, security, love sense in that too!
 
Jaycee, could you please explain to me the advantage in putting money into the offset account against the mortgage, instead of paying a lump sum into the mortgage?

I still don't understand it as I have never seen any figures on how it works?

Thanks,
Daniel

Lets say you have a $200k Mtge now.

You borow a LOC of $200k against it.

You draw $120k from the LOC as a $100k deposit & $20k purchasing costs for an investment property, getting the other $400k as a separate mtge

So you have

$200k mtge (PPOR, not deductable)
$120k LOC (IP, deductable)
$400k mtge (IP, deductable)

it makes sense to pay down the PPOR non deductable debt first right ?

If you one day make that PPOR an investment property, it will have no debt, so will definitely be cash flow positive

However, if you scrimp, save,make or win close to $200k, and put that in an offset against this PPOR, then one day you decide, I wanna move into a differnt house... you can pull the $200k out of the offset and use that for your new PPOR.

THis means borrwoing $200k less for your new PPOR than you woudl otherise
have to.

And the mtge on the old PPOR, would get interest cahrged against the full $200k balance again - renting this house means that this interest is deductable. If it was against your new PPOR, it would not.

Hvingsaid that I had a $60k mtge, debt recyecled it and it's now about $2k - Im payig it off, fk it, cant be bothered messing around.. moving will be more difficult, but Im in no rush to move jsut to invest and be comfortable where I am at the moment, so I hope I will have createed a few options by the time moving comes
 
Or...

If the only loan(s) you have are investment loans, it makes sense to park your cash in offset accounts rather than pay down the principle. You can have 100% access to 100% of that cash immediately should you ever need it, but you still get the same effect of putting in your mtge (interest goes down by same amount).

If you have nowhere else to put the cash (no PPRO Mtge instead / personal debt that isn't deductable ?), then put it against the higest interst rate loan to cut down your bills, but knowing you can access it when you want.
 
Thanks Jaycee. No i have no other debts but IP loans!

I do have a spare 10k now but i dont have any pffset acounts attached to any loans. When i refinance in November i will put an offset account to that loan.

I am currently buying another IP so i could attach a off set to that and park some extra money.

Thanks you made sense. Spot on!:D
 
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