Property investment and home loan need help, Thanks

littlepcat on 05/03/2015 - 02:15

Hello, everyone..

I need some help with my current financial situation..

I have a home loan, which I have $90,000 in the offset account and still owe the bank $65,000.
My house values around $250,000.
I possibly can pay off the loan within two years if nothing goes wrong.

Now, I am thinking of buying another property, which values around $190,000, and rent it out for $250pw.
If the new home loan can get approved,
I will take $40,000 out from my offset account, use it as the deposit for the 2nd property.
The rental income will be able to just cover the principle and interest.

Do you think this will be a good move?
Or I should just pay off my current home loan first ?

Any suggestions?

Thank you very much.

Financial

Comments

  • loulou1 on 05/03/2015 - 08:07
    +1

    I don't know your exact situation so will not give advice about whether it is a good idea or not but you also need consider other costs besides loan repayments. You need to factor in council rates, agent fees (if you don't intend on renting privately), insurance, maintenance and repairs, vacancy periods, etc.

  • jaybmate on 05/03/2015 - 08:40
    +5

    I'm pretty sure you should be able to use the equity in your other house instead of a deposit. So you can get to keep all your money in your offset account. Just make sure you have at least 20% of the total value (88k) in your loan paid off (in the actual loan, not including offset).

    And its better this way, to have the least amount of money in your investment property, so that money can be put in your property your living in. Because the investment property interest losses (if any) are tax deductible, where the other house is not.

  • jwing0001 on 05/03/2015 - 11:59
    +1

    Think for negative gear benefit~

  • AMLagonda on 05/03/2015 - 12:18

    ha I want to do this as well, But we only want a rental for my mother inlaw as it a win win for all of us.
    But the value of my house is $500,000 and I only owe $50,000.

  • Baghern on 06/03/2015 - 11:16
    +2

    Need to add to title "doesn't live in Sydney"… stop all the crying

  • littlepcat on 06/03/2015 - 13:05

    Thanks a lot for all the suggestion.
    I appreciated.

  • Steptoe on 06/03/2015 - 22:21

    Does your existing loan have a redraw function? What is it's maximum loan amount? Could you pay for the whole property without exceeding the redraw limit? Can you convert your existing loan to Interest Only?

    Here's my thinking:
    Pay your PPOR loan balance to zero with the offset funds. Then at settlement redraw deposit, conveyancing costs and stamp duty back out of the loan. Get a new Interest-only loan for the Investment property than can also get a 100% offset. Put any excess cash into the 100% Offset Account that's linked to the highest interest rate.

    **disclaimer: not a Financial Adviser etc.

  • littlepcat on 10/03/2015 - 01:12

    Hi, everyone,

    Sorry for being away for a few days and for not being clear enough in my first post.
    Regarding to my current 30 year home loan, if I only pay the minimum every month, I will still have around $155,000 to pay.
    I always pay more, so far, I've overpaid the bank $90,000, and this money is available for me to use.

    My bank can approve me another $190,000 of loan.
    Like what jaybmate mentioned, I can use the equity in my current house instead of a deposit.
    So, basically, I can buy the 2nd property with all the borrowed money.
    All I need to pay is the stamp duty, fee.. etc.

    But my bank only can offer me %4.3x. Maybe I should move to loans.com.au ?

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