Change PPR TO IP offset account

Discussion in 'Loans & Mortgage Brokers' started by chrissiu84, 13th Apr, 2017.

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  1. chrissiu84

    chrissiu84 New Member

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    Hi,

    Just discovered this page and have been reading and learning a lot the past couple of days.

    We are thinking or rentvesting turning our PPR to IP

    My question is, I put all of my salary into mortgage payment currently on PI loan. We live off my partners wages.

    Should we convert to IO and leave my salary plus the rental payments going into the offset account to build a buffer. Does this mean I am positively gearing and will there be any tax implications in doing so.

    Eg.

    Income: Salary: 2500 f/night
    Rental income: 600 f/night

    Expenses

    IO: 1000 f/night
    Holding cost: 200 f/night

    Or do we just pay the minimum amounts required and save the surplus cash we have to build a deposit for another IP in the future,

    Cheers
    Chris
     
    chrissiu84, 13th Apr, 2017
    #1
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  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    If you are disciplined just pay the minimum or even interest only and put all the cash and income into the offset. You will save more interest this way and avoid tax complications of paying off an investment loan
     
    Terry_w, 13th Apr, 2017
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  3. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Yes, this would be the best option and ideally done form the get go.

    Depending on what bank you are with this could be relatively easy to do or require a full application and possibly a refi depending on your banks policies?

    Positive gearing is making a profit after ALL costs and expenses so hard to answer but funds in an offset account will reduce interest payable and increase the chances of being positively geared. Would need all the figures to definitively answer and even then a 5k cf+ property can be neutral or negatively geared with the right (or wrong) repair bill for example.

    You need to seek specific advice from a mortgage broker and a tax accountant before proceeding further.
     
    Colin Rice, 13th Apr, 2017
    #3
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    typically and historically, logically and economically, for those with decent money habits the io and 100 % offset structure is sweet.

    Step up ASIC and APRA and with a bit of media spin .................. and suddenly this is as socially acceptable as those that have more than one IP.............

    The pricing spread that will occur or sure to "stabilize"the banking sector to Euro standards means we need to analyse on a case by case basis if there is actual value in IO.

    ta
    rolf
     
    Rolf Latham, 13th Apr, 2017
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  5. dabbler

    dabbler Well-Known Member

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    My take would be different, unless aggressively acquiring and needing to use lenders that take actuals, I would keep it on P&I and put the excess into an offset.

    This way you are slowly paying loan back & the only tax problem is if you start getting enough income, you will pay some tax, but that should be the aim of investments, to get actual income, or at least have a plan for when this happens.

    At the end of the day, it is always going to be better to pay loans back :)
     
    dabbler, 14th Apr, 2017
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  6. Ethan Timor

    Ethan Timor Well-Known Member

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    Other advantages of P&I: lower interest rates (with most lenders) and higher servicibility for future acquisitions (again, with most lenders).
     
    Ethan Timor, 17th Apr, 2017
    #6
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