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Borrowing on temp contract moving to an ongoing position

Discussion in 'Property Finance' started by littlefinger, 29th Dec, 2016.

  1. littlefinger

    littlefinger New Member

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    Tasmania
    Hi, first time poster but have been lurking in the shadows. I have learned lots but still a long way to go and hopefully I’ll be able to contribute knowledge and experiences in the future.


    I have been working for the same Federal Government department since I graduated university 12 month ago, I am currently on my fourth non ongoing contract with them am I will be commencing an ongoing graduate position in February with the same department. I am aware obtaining finance might be difficult as I am currently still on a temporary contract until February.

    My current salary is in the mid $60,000s and I have no dependents and currently I have minimal living expenses (I don’t currently pay for accommodation).

    I am looking to purchase a PPOR as my first property, my current plan is to pay down the principal, then use the equity to borrow 105% for investments (for better deductibility). I am looking at properties up to 400k, I have the 20% deposit plus 5% for closing costs.

    I acknowledge that a relatively expensive PPOR will effect my borrowing power for future purchases but hopefully I will be on a better income in the next couple of years. I would not be happy rent vesting as I want a PPOR on an acreage for lifestyle reasons. Although I am concerned about paying CGT on a property if it is over 5 acres. In the future I would consider renting the PPOR out for a while (once some equity is paid down) if it would help with borrowing power.

    Are there any obvious flaws borrowing 80% for the purchase and paying down the principal as fast as possible? The bigger deposit the better? The theory being it will reduce my monthly repayment and increase borrowing power.

    Also what loan features should I be looking for? I know I need the ability to make extra repayments(without penalty), I do not think I need an offset account as I am more interested in low fee and interest rate so I can repay it faster.

    Thank you in advance for your time.
     
  2. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    I wouldn't pay principle if you can avoid it. Just deposit into offset accounts and then you have options. If you move out then you can take your offset with you to a new loan. If you have no further borrowing cap then you can pay down the loan at that point.
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    12 months of rolling contract is a fairly good track record. There's a few lenders that wouldn't do it, but when combined with a permanent position in Feb and a 20% deposit, there's still plenty of lenders that are happy with this.

    It helps a lot if you're very clear on what your intentions are over the medium term, as this will allow the best loan structure to be put in place for your needs.
     
    legallyblonde likes this.
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    I don't think you'll have any dramas regarding the employment contract - pretty standard stuff in the public service and you're transitioning into a full time role anyway.

    Cheers

    Jamie
     
    Terry_w likes this.
  6. littlefinger

    littlefinger New Member

    Joined:
    26th Jan, 2016
    Posts:
    3
    Location:
    Tasmania
    Thanks guys, lots of food for thought.


    I agree it is probably a good idea to keep my options open, even if I don't see myself moving.

    The public service appears to be very much in the swing towards an increase of working from home and a non-ongoing workforce.


    cheers.