Big Day This Tuesday

It is all explained in Post #31 .

Being employed and having payslips is such an awful way to demonstrate income as it consumes so much of one’s time.

I much prefer the passive ways such as self-funded pension payments and rental income - allows one to maximise one’s life .

 

I agree, so many still like to place all people into tunnel vision. Why it has to be payslip income, why it cannot be passive income whether derived from rentals or Super like you pointed out or even lousy interest. Or even future CG of the asset base? I really enjoyed reading this thread!
At the end of the day it is still money coming in and going out.
Though, I cannot believe you have so many such products 'fish' with just with one lender?
I alone have 24 accounts with CBA....BUT also many with others.
Thank you for sharing as too ALL my loans to date are I/O and some are due for renewal in 1.5 years time, lower LVR than yours if we look at overall portfolio,.... and I have learned lots from your thread!
Even though we cannot access Super yet one of us is not far off, so I can utilize that strategy of income from Super or even the idea to suggest to sell our PPOR... very interesting indeed.

 

Exactly.

... and IMHO passive income is far more reliable and less risky than employment income.

Since we retired over 8 years ago, we have slowly been simplifying our investment setup. When we fall off the perch (hopefully in 25+ years time), we didn't want our kids to deal with our fairly complex setup.

So we are slowly and methodically reviewing everything:- loans, bank accounts, insurances, ...

The fewer providers and the fewer products, the better!!!

I am glad someone benefited from this thread. That is one of my reasons for being on PC, to help others. The other is to continue my education/challenge my investment understanding, beliefs, etc.

Good luck with your refinancing. Don't be like some people and be intimidated by banks. I treat them like fruit shops. If I go in and I don't like their product, I go to the one across the road.

The two refinance loans were with the Dragon Bank. Prior to the I/O expiring, I did go and see them. Their "fruit" was to offer me two P&I loans, one at 5.22% and the other at 4.77%.

I told them that I didn't like P&I loans and that they had to be more competitive with their interest rates. I asked what I could do to "force" their hand.

I was told to write a letter to Head Office. No, no, no...

Why would I pay an extra $11,000+ a year in interest ($215 a week) when I could get the same fruit elsewhere. And that is not taking into account the hit on our cashflow due to the principal payments.

So, that is what I did; I went to the fruit shop across the road. Bye, bye Dragon Bank

 

I wish you both long and healthy life, my neighbour lived alone till 94 so you may have more years ahead, I plan to live to at least 100, after all we do live in Australia!
I agree with everything you said, the key is that some of us have passive incomes and self-sustaining portfolios which unfortunately we need to explain and prove to illustrate how it works outside the normal standards, benchmarks or their calculators!
I too think other various passive incomes are more reliable than just employment income. I can choose who lives there if someone cannot afford you can lease to someone that can, so many choices and options not being dependent on only one source of income, can sell some, have many choices....
We run a business too, and feel self-retired on part time basis for the last 20 years or so, as we have people and processes in place that can continue doing this well into our older age or even if we were no longer there. Hence why would our personal ages matter in such circumstance for loan terms?
In addition I too would like to simplify over time the investment setup and will do so progressively at each refinance stage or closer to retirement age.
I plan to pull out some securities (titles) of some IPs as financiers hold too much IMO. BUT, at the moment I like how various loan terms fall in different years rather than just one particular year. Did you modify that to fall say closer in time for any of those reasons?
Even though I don't need to refinance until 1.5 years I think the key is to plan for it ahead, especially with the ideas you suggested.
A dear friend of mine is a Treasurer of a bank, and in recent discussions I mentioned why offset cash is not counted, being the reason we can draw out of it any time, but I said my situation is different.
I explained how paying off my loans in SMSF would be not beneficial, as deductible or productive debt would become non-deductible or unproductive debt. What I mean by that my Bare/Custodian Trust would be wound up or paid off, the asset then needs to be transferred to my Super trust, which in turn would push me over the next land tax threshold limit (added to other cash IPs) resulting in me paying more land tax and also income tax (if the loans are paid off in full and will hence start receiving extra income). I said they actually should lend me more (my friend laughed and said I am an exceptional case).
If I keep cash in offsets, I pay minimal interest, but also less land tax, hold more asset base which in next 10 years or so will grow in value more than the actual interest I pay.
Similar could be suggested with IPs in personal names, to pay P&I would mean I would need to pay at least 37% in tax to pay the principal, but why if LVR is very low and offsets are growing in cash. As you say we have history to illustrate that.
I deal via broker, rather than Relationship Managers, although I will write a business plan with exit strategies and figures and numbers just to satisfy them. So I will let you know how I go down the track!

 

Thanks for your posts Kieran and MWI. Fantastic contribution. My wife and I have just received approval for IO loans on our portfolio which were due to move to P&I in September/ October this year. A happy outcome for us, and our largest restructure since we began investing in IP’s 18 years ago.

Some great tips from both of you. I can’t elaborate as I’m on my phone, suffice to say our overall portfolio will continue to be positively geared enabling us to explore options to reduce our work.

Must say, the past few years have been challenging with Apra changes and Shorten’s proposed changes.

What I’ve learnt, stay the course and not to make drastic/impulsive changes to my portfolio based on what might happen.

Kind regards Jason

 

Yesterday, I received the final loan statements for the last two loans we refinanced.

Using the loan balances and interest rates as at settlement from both banks, the financial benefits to us by refinanceing are:

1. An Interest saving of $160 pw or $8,320+ pa.

2. Both new loans are IO whereas the old loans were P&I (originally they were IO). So, our cashflow is better.

3. The new loans both have 25 year terms. So, we will be 88 when they expire (unless we refinance some time in the future).

Just wish we have more IPs with loans that need refinancing .

 

Sounds like a good outcome for your situation.
How long is the IO period though? I'm assuming not 25yrs but maybe 5

 

Yeah, five years.