Melbourne | Home loan and tax suggestion

Hello everyone ,

Newbie here and soon planning to buy my first home. Although this website is for big investors I hope you will not mind if I am first time buyer asking basic questions.

I am soon planning to buy 3-4 Bed room house in Melbourne outer northern suburbs. I am planning to spend about 400-470K. I am searching but still no luck.

I have saved about 150K and earn about 4k every fortnight after tax.

Last year I paid about 66K tax , but this year and beyond I want to be intelligent in reducing it.

Questions

1) I have read in posts by Terry of getting 105% loan and not to use any deposit , so what questions I should ask to bank about using that option in my home loan application.

2) How to plan better so that I can reduce my tax burden next year.

3) I am eligible for fho grant of $10k but I am not getting any good house which I like. Is it good idea to take house and land package and design and continue to live on rent till that time ?

What are some good tax and financial planners in Melbourne who can guide me. Also books which can guide me to be better make better financial decisions.

Thanks in advance

 

1. That is for purchase of investment properties, it won't be applicable to you if you purchase your home as ppor interest is non-deductible, so the lower loan balance for you the better, in my opinion.
2. Multiple strategies from this website you can use but if it usual involves making an investment first( IMO again.) One strategy you can use without investing is to max out your concessional super contribution, which is 30k per FY I think, the salary you sacrificed will only be taxed at 15% but bear in mind you won't have access to it until you are 60 I think, unless you get a SMsf, in that case you can use the money to invest I think, limitation applies.
3. Each to their own.

Plenty of good ones on the forum, good luck.

 

Thank you for clarifying about ppor and investment loan scenarios.

I am not thinking about super for the same reason you mentioned they will be locked out for long long time. And also my super is not making huge money for me. I checked this year due to poor share market my super made negative growth.

Thank you for sharing your opinion. Much appreciated .

 

If you plan on turning the house into an investment property in the future, AND had someone that could go guarantor or lend you the 25%, it can be a great idea to borrow 105% even on a property that is OO at the time of purchase. Firstly, when you turn it into an IP you will have a larger loan and secondly, you can save money to put towards your 'dream home'.

It sounds like you're on the right track doing a lot of investigation before you jump in, let us know how you go!

 

Thanks Simon for your reply.

I will not have any guarantor as I am alone in this country. So was asking if I could use Term deposit as guarantee amount as per Terry's post.

Yes my plan is to change this property into rental in near future while i plan my dream home in coming few years.

I am not sure how to restructure my taxes to lower them and use them better and that is biggest question for me at this moment.

 

You could look to borrow 95% + LMI for the purchase (though run the LMI numbers as it will cost you) - then keep your residual savings in the offset whilst it is your PPR.

Also note you will be eligible to a stamp duty discount as a FHB. Keep in the mind it has to be a PPR for over 12 months otherwise you will have to pay back the cash grant

Then once you have moved out to your next property, move the funds out of the new investment offset account.

 

Thanks Charpj,

I am looking to make this as my PPR and live for at least 2 years before i even think to get something new.

I was reading online with search keyword "Term deposit as guarantee for home loan"

It says if you provide 25% of property price as Term deposit guarantee we can put that as guarantee.

Imagine if i buy house for around 480K , 25% of it will be 120K and i can borrow 100% money from Bank.

However from reading it was not clear if I can be my own guarantor

Now if i see what it saves me i can calculate that.

Term deposit will earn me say 3% interest and I will have to pay extra difference of that from my home loan rate as interest. Which seems pretty good.

I just wanted to get confirmation from you guys that i am thinking on right track for this ?

 

You are on the right track, don't forget you will have to pay tax on the term deposit interest you earn!!!

Might be time to sit down with a spreadsheet and go through the options

 

You need to get some specific tax advice. It can be a good idea to borrow 105% for an owner occupied home, but it may not be such a good idea if you will incur extra costs. It all depends.

There are other ways of borrowing 105% for the first property too. One is a spousal or related party loan - but get tax advice first.

 

Buying a house to live in won't help your tax, and may not help you in crease your wealth either.

As far as books go, local libraries are a good place to start. And here!

Consider renting out a room or two of the new property. If you can put up with sharing, it means part of your mortgage is now deductible against your taxable income.

 

Wealth creation and tax minimisation are 2 seperate issues.
Some may argue otherwise, however for me wealth creation is the goal, tax minimisation is a secondary benefit.

With that budget in mind (470), you could possibly buy your main residence and look to buy an investment property soon after having $150k deposit.

I don't see it as a tax burden. Don't get caught in the trap of looking to minimise tax but doing it through a sub standard investment.

If I were in your position I would be looking for a house Circa $800-$850k in solid long term performing suburbs.
1. It will continue to perform well long term
2. You can afford the shortfall due to your income
3. It will be geared based on est yield of 3- %.

Even if you go down the H&L route, I would look to buy something like above for investment.

As for 105% borrowing, you may buy your own PPR first, have residual cash, pay onto and redraw from your PPR loan and pay for IP deposit or stamps ect...

Tax and structure aside, asset and strategy comes first.

 

Given the 50% stamp duty reduction a purchase <$600,000 is also appealing.

 

Again.
Opportunity costing.
Estimated capital gain on $800-$850k property less additional stamps cost vs estimated capital gain on <$600k property.

All comes back to asset selection.
Taxes, stamps, gearing etc are all peripheral issues.