If you could start again - erasing the mistakes of the past

Discussion in 'Loans & Mortgage Brokers' started by Dan Donoghue, 30th May, 2017.

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  1. Dan Donoghue

    Dan Donoghue Well-Known Member

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    If you could start again with only a PPOR and a wad of cash (about 80% the value of your PPOR), how would you start. How would you set up your loans with regards to maximising investment potential?

    I find myself presented with this very option.I "think" I need a PPOR P&I loan for 80% the value of the PPOR and an offset against that account with all funds in it. Monthly repayments are drawn automatically from the offset.

    Does that sound right? It makes sense in my head but I always like to seek opinion from this forum :).
     
  2. hash_investor

    hash_investor Well-Known Member

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    I would definitely buy some LICs with the cash. And would also buy/build a brand bew home somewhere easy to rent and depreciate it
     
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  3. Dan Donoghue

    Dan Donoghue Well-Known Member

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    I keep hearing about this LIC stuff, I guess I need to do some research :)
     
  4. MikeyBallarat

    MikeyBallarat Well-Known Member

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    No such thing as a 'mistake'- everything all of us ever do is done for a reason at the time, no need for any regrets :)
     
  5. Dan Donoghue

    Dan Donoghue Well-Known Member

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    True and it has been a learning exercise but it is still something that I can "fix" moving forwards :). At the time I knew nothing about investing or loan structures so paying a lump sum off my mortgage and not into an offset account, "seemed" like a smart move :p
     
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  6. Sackie

    Sackie Well-Known Member

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    imho you just need to engage the right loans/ finance experts at the times when finance issues are at play. They need to understand your position, goals, risk tolerance, strategies etc then they will come up with the best options and strategies for you to investigate. That's all we ever did and it's worked for us.
     
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  7. tomlemke

    tomlemke Well-Known Member Business Member

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    Past is the Past.
     
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  8. PandS

    PandS Well-Known Member

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    mistakes is what lead me to today position so I don't want to change anything
    I learn better with a few mistakes along the way and keep my ego in check
     
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  9. MikeyBallarat

    MikeyBallarat Well-Known Member

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    It's amazing how few people know about the magic of an offset account - time to start spreading the word ;)
     
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  10. Dan Donoghue

    Dan Donoghue Well-Known Member

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    Yeah we currently have PPOR in Syd and IP1 in GC.

    At the end of the year we are moving into IP1 and making it PPOR, we have decided to sell Syd PPOR rather than make it IP1.

    Many reasons for this: we have cash locked into it (55% LVR), It's valued higher than we thought (like 100K higher), it's a townhouse only 9 years old with a back yard 9X7 metres (ie no granny flat, no reno to unlock equity, there is literally nothing I can do to improve this place).

    If it were presented to me online right now as a potential IP, I wouldn't even click into the link because it simply doesn't fit my plan.

    It's a lovely home and we have loved living there but it's not what I want to invest in.

    Being that we only have the one IP at this point, we have a very good opportunity to sell, set up the loan against GC exactly how it should be and then start again. GC is currently 63% LVR so I will look to pull this out to 80% and into the offset if at all possible too. We will be looking to get back into the market around feb / mar next year so we will only be out of it for a couple of months :).
     
  11. chylld

    chylld Well-Known Member

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    So is the scenario like this? (example numbers)
    PPOR value $1m
    Home loan $800k
    Cash in offset $800k
    ?

    If that were the case, and given that I currently favour liquid investments over Sydney property at this time, I'd pay down the home loan totally and redraw it as a few LOCs and use say $500k of those to buy LICs, index funds and managed funds. Once each LOC is used up, switch to SVR to reduce at-call risk. All investments set to pay dividends/distributions into a cash account so that when the next GFC comes, you still have cash to live off while using the remaining LOCs to capitalise on the downturn.
     
  12. jins13

    jins13 Well-Known Member

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    I strongly encourage it Dan and I am on the process of learning and delving more into this. It's not fast and the results tangible in the short term but seeing the data for the last 5 years, gradual growth over time.
     
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  13. Ace in the Hole

    Ace in the Hole Well-Known Member

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    Except for choosing to not take any action at all because of being scared to make a mistake.
    Many people make this "mistake" and fail to learn anything.
     
  14. Dan Donoghue

    Dan Donoghue Well-Known Member

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    Yes, that is the scenario I am thinking is the right thing to do. Cash in offset wouldn't be 800K in that scenario though, it would be more like 600K ie 200K still owing on the PPOR.
     
  15. kierank

    kierank Well-Known Member

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    @Dan Donoghue, my view is that I am glad I made the mistakes I did in the past (and I made quite a few) because those 'mistakes' taught me valuable lessons that got me to where I am and it is unlikely I will ever make them again.

    If I hadn't made those mistakes (in the past) and I made them in the future, these ones would do a lot more damage to my Net Worth (than the ones in the past) and I now have a lot less time to recover from them.

    Dribbles from an old fart :) :).
     
  16. chylld

    chylld Well-Known Member

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    In that case I'd do similar as my previous post, but keep an SVR split for say 300k attached to an offset holding 100k cash (debt recycle the other 500k). Set all investments to pay to the offset.
     
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  17. Cimbom

    Cimbom Well-Known Member

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    I wouldn't have purchased the crappy regional property that I thought was such a great buy at the time. I was looking at a middle-ring apartment as an alternative at the time and would've been 200k better off if I went with this option. Hell even going on a holiday with the deposit would've been more of a financial win - oh well, nothing can be done now :rolleyes:
     
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  18. Player

    Player Well-Known Member

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    I have a horrible vision Kieren. :eek:
     
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  19. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Mistakes meh I have made plenty but none to big not to recover from fortunately.

    I would have told the Missus we are staying put in a very cheap but decent rental property at the time and kept building more but I succumbed to her wish for a nest so moved into a PPOR :)

    This was back when Perth prices doubled in a 2 year period, eeek!

    We still did ok though.

    Yep, very powerful if used correctly.
     
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  20. PandS

    PandS Well-Known Member

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    you looking at the rear mirror with hindsight infor :)
    the fact is if you have never made this mistake and have a time machine without any knowledge of the current situation and travel back in time you would likely to make the same decision.

    what is more productive you learn from it and move on and make a better decision next time.
     
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