Question as title, as I am a first home buyer earning no more than 40k a year? My wife is currently 6 month pregnant and unable to work. We both have family money behind this. We are looking to buy a property approximately 450k and my inherit is just enough. what should I do?
Should I pay off the house or keep the money for future investing?
La2swin on 23/06/2015 - 01:01
Comments
Interests rates are at an all time low, so get a mortgage and do what PissLUR has stated.
http://www.anz.com.au/personal/home-loans/our-home-loans/ext…
is having a home loan benefit me in anything? With the offset account, say I deposit in 100k and borrow 300k, at the same time I put 300k in the offset account. is it likely that I will pay no interest at all while still having 300k on hand? do i have to pay tax for the incurred interest from 300k ?
Yes, yes and yes to all your questions.
When you have offset 100%, you pay no interest. You will just be liable for the annual mortgage account fee.
Please don't let your bank know or they will close down the account.
Personal choice but I would pay for the house outright.
Reason being that you will pay tax on income from what you invest and you will pay interest on your loan otherwise.
Your investments are "almost" never going to beat your overheads on a loan / mortgage.
Buying a house outright even if your wife wasnt pregnant would be the right thing to do.
But since she is pregnant this imperative would demand a house purchase regardless.
I think the answer to your question needs to be tailored to your situation.
From what you've said I gather apart from the fact you've got a lump sump. Your actually in a tight spot, from my perspective anyhow.
450k sounds like a tidy sum, but isn't really all that much.
Let's say you take a loan and use the 450k as deposit and rest in offset. You are essentially borrowing against time, meaning your already down whatever initial capital you had.
Benefits of borrowing :
All time low interest rate
If investment home, can depreciate home and also can negative gear if you make a loss on rent
Buying time and speculating on capital gain.
Buying something beyond a 450k possible to buy a more expensive place using it as a deposit.—
Benefits of outright purchase:
No mortgage repayment stress.
No stress about job stability.
Good environment for a family starting out.
Possibility of positive gearing investment if you rent out a room or two.—
So many assumptions to make but if it were me.
40k salary is such a low income-tax bracket it is not worth thinking about negative gearing.
Small baby means unexpected costs can arise, which means I wouldn't want to add mortgage stress.Wife might not be able to work immediately after having baby, if this is a possibility then 40k really needs to count.
Renting out a room or two can be stressful but at least you have more control over something like that then a permanent loan.Buy in a good area, buy below your means, buy in a area which has future potential.
Good luck.
Broker here:
The only problem with the scenario of borrowing money and put your fund in the offset account is: will any lender lend you any money? 40k income with an expense of 2 adults and 1 kid coming. I can't see the lender lending you 50k let alone 300k. Unless there is other source of income you did not mention.
I agree I don't know if you would get a loan even though you have the funds available?!? I want to get another investment property but the bank won't lead me money due to serviceability. Even though we have a bit of savings and I know I can afford it easily. The problem is they take worst case scenarios.
So if you can get another home loan for an investment property, I would put the minimum deposit required against that loan and put ALL the remaining money in your offset account against your family home. If you can not get a loan I would just put all your savings and earnings into your offset account.
I do not pay any principal off our family home but I offset against that loan, let it build up and when I can get a loan (when the wife goes back to work) I will use that money to pay the minimum needed on the investment property.
You want to pay as much interest as you can on the investment property (while building your portfolio) so that it is all tax deductible. By offsetting your savings against your family home you are paying the least amount of interest which as you know is not tax deductible.
Split the money ,use as deposits on your home and an investment property…negative gearing is your friend.
Try your best to lean towards buying the house; while most home owners nowadays may have real estate for their own reasons, if you are looking for stability in the future (i.e. having a roof over your head) it might be worth it. I used to live with my parents until two years ago, saving for a deposit, and in those two years they have had to move FOUR times (they are renting, and unfortunately landlord decided no longer wanted tenants) it becomes a PITA worrying about whether the landlord will kick you out or not.
Just my 2cdeposit on the house. deposit on an investment property. rest into offset account for deposit on the house
Pay off your primary residence. Have all the loan on your investment property. Minimise tax.
we decided to go ahead with no mortgage. is there anything I should be aware while buying the very first home?
my advice would be take lots and lots of photos while inspecting. you have every right to have the place perfect and spotless the day you finalise the handover. cannot stress enough to do the final inspection before settlement very thoroughly.
best of luck and happy house hunting
Use the inheritance money just enough for your deposit and place the rest on the offset account.