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Almost paid off my PPOR homeloan what should I do?

Discussion in 'Property Finance' started by fullylucky, 22nd Aug, 2015.

  1. fullylucky

    fullylucky Well-Known Member

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    Background: I have a PPOR loan and 1 IP Loan. For the IP loan I'm making interest only repayments for maximum tax benefit.

    Seeking advice for my current situation:
    I think in 2-4 months time I will pay off my first home loan.

    throughout the loan I made additional repayments more than what's required (repayments). I have an excess 100k CR available in the loan.

    Just wondering what do people normally do at this stage?

    If I pay off the PPOR homeloan I would contact my employer payroll and get them to change income transfer to the investment loan? or contact bank and have the new offset account offset the IP loan?

    But that would reduce the interest that I can deduct off my income for my tax return?

    What do people normally do at this stage?

    Should I spend the 100k on renovations for my PPOR and continue paying interest only for IP loan?
     
  2. FireDragon

    FireDragon Well-Known Member

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    What's your investment goal? If you are planning to retire with rental income in the future, why don't you use the 100K to buy more IPs?

    It sounds strange to me to do PPOR renovation for maximising interest tax deduction.
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    Open the champagne and celebrate.
     
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  4. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Have you considered buying IP2 ?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes its celebration time.

    Keep the existing loan open if you can. You can use that $100k as deposits on the next investment property.

    For the existing property I would not pay it down but keep it Interest Only. Open an offset acccount attached to this loan and start storing your cash there. It will save interest and will make you pay more tax but this is a good thing as you are making more money..

    If you have a low income spouse you migh consider a savings account in her/his name - depending on their taxable income, the rate and the family situation.
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    She's severely depreciated ;)
     
  7. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Keep the existing home loan open so you can use it for deposits. Depending on the lender you might want to leave a few dollars owing as many lenders will close the account automatically when it's paid in full. This saves you the trouble of reapplying for an equity loan if you need deposits in the future.

    Have an offset account against the IP and leave any surplus savings there.

    Great position to be in. :)
     
  8. fullylucky

    fullylucky Well-Known Member

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    What does this mean? go on a holiday? with the 100k?
     
  9. FireDragon

    FireDragon Well-Known Member

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    Use 100K to buy champagne :p
     
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  10. fullylucky

    fullylucky Well-Known Member

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    I have a little bit but I manage my IP myself. I think I would be swamped if I get another IP. My parents say you have two houses already shouldn't buy anymore. I thought about buying IP2 but... it looks like everything is against it with the recent increase in investment loan interest rate. It's like the regulators telling investors, sending a signal to STOP!
     
    Last edited: 22nd Aug, 2015
  11. fullylucky

    fullylucky Well-Known Member

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    Also where would it end? what happens after IP2? ip3?

    What happens after IP3? ip4? it won't end. That's what my friends said...
     
  12. fullylucky

    fullylucky Well-Known Member

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    I don't have a spouse but I get what you are saying...

    Don't pay off the loan 100% because it's easy to draw out the fund if you need it.
    But don't let it sit in a 0% interest account make it work for you and put it in someone else's account but it will earn interest and that adds to the other person's income and will be taxed.. SO best to put it in someone with low Marginal tax rate.
     
  13. fullylucky

    fullylucky Well-Known Member

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    Ok I'll contact the bank and confirm and let them know to set this up on Monday.
     
  14. fullylucky

    fullylucky Well-Known Member

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    I'm not conformable getting any ip outside of my own state. I like to be able to get there quickly.

    If I get IP 2 I think i would be then over the threshold and then I would have to start paying Land Tax.

    All signs telling me to stop buying buying another IP... but then you hear stories people buying something last year and then selling it for 200k more this year...
     
  15. Cimbom

    Cimbom Well-Known Member

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    Why did you buy an IP in the first place? What was your aim? That should help you make a decision.
     
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  16. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Fair enough, property investing is not for everyone.
    Your parents advice seems spot on with this one.
     
  17. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Agree with Terry and Pete.

    Keep the ppor loan open just in case you need access to funds for investment in the future.

    Link an offset to the IP - transact from that account. Keep all your savings in there.

    Congrats - you're in a great position. Paying off your ppor is an awesome accomplishment.

    Cheers

    Jamie
     
  18. Beelzebub

    Beelzebub Well-Known Member

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    You've been on here for a while now Fully Lucky. Wouldn't you still be better off in the long run with a second IP managed by a PM and a land tax bill? As opposed to spending the rest of your life worrying about 1IP and the price of heaters at Kmart?

    A second and a third IP seems like an end game. 1 rooming house forever seems like a nightmare. That's just my opinion of course.

    And remember what everyone on here says about friends and family and multiple IPs. Don't expext people who don't invest to get it and take advice from people who have already done what you are trying to do.
     
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  19. fullylucky

    fullylucky Well-Known Member

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    I think there is a big difference between IP1 and IP2.

    Everyone gets an IP (IP1) for negative gearing their income. since income is taxed at crazy high marginal tax rate like 37%... also you can claim a ton of things that's like the same as 37% off products and services.

    IP2 wouldn't give you more benefits that you don't already have or as much.
     
    Last edited: 23rd Aug, 2015
  20. fullylucky

    fullylucky Well-Known Member

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    So talk to bank and get pre-approval?

    I'm not brave enough... for IP 2...

    IP1 loan is 800k+...