Join Australia's most dynamic and respected property investment community

now that banks increased the interest rate is it better to pay off IP loan first?

Discussion in 'Accounting & Tax' started by fullylucky, 19th Aug, 2015.

  1. fullylucky

    fullylucky Well-Known Member

    Joined:
    27th Jun, 2015
    Posts:
    529
    Location:
    QLD
    Now that banks increased the interest rate by 0.27% for IP loan.

    Is it better to pay down the IP down (less interest to offset income.)

    or still better to pay down your own PpoR loan first?

    Has anyone done any calculations on this?

    (CBA inreased my investment loan on 10 August.)
     
  2. Tony Fleming

    Tony Fleming Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    663
    Location:
    Sydney
  3. EN710

    EN710 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    2,751
    Location:
    NSW
    Hmmm - this is just rough calculation on my head
    $24000 per year interest on investment loan is tax deductible ~ 30% back ~ $8000 = $16000
    $22000 per year interest on your PPOR is not tax deductible = $22000
     
  4. skater

    skater Capitalist -- www.skatepro.com.au Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,883
    Location:
    Sydney
    It's usually best to get rid of non-deductible debt before deductible debt.
     
  5. Hodor

    Hodor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,109
    Location:
    Homeless
    Better to pay off ppor debt by a big margin still.
     
    legallyblonde likes this.
  6. legallyblonde

    legallyblonde Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    819
    Location:
    TAS
    Non-deductible debt first! Hands down!
     
    spludgey likes this.
  7. spludgey

    spludgey Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    972
    Location:
    Sydney
    Depends on your marginal tax rate. If you have more than $18,600 (from memory) of taxable income per year, you're better off paying down the PPoR.
     
  8. fullylucky

    fullylucky Well-Known Member

    Joined:
    27th Jun, 2015
    Posts:
    529
    Location:
    QLD
    THANKS everyone for confirming this. I will continue paying down PPOR loan.
     
  9. Credit cards first (higher rate) then PPOR

    A common question I am asked is should I pay off my HELP debt early?? Generally no if there is a PPOR debt. The HELP debt has a low rate of indexation and is also non-deductible. Also unless you tell a lender your HELP debt its a private debt and balance is unknown. Doesnt always count in a credit check (but can).

    Another one is a tax debt. I dont know many lenders who see a tax debt as a positive. Best repaid as its basically a on demand debt. I'm often asked to confirm taxpayer tax debts = zero by a lender to give their client approval.
     
  10. Sonamic

    Sonamic Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,322
    Location:
    Sunny QLD
    This is when an offset is of most benefit. If you plan on staying in your PPOR long term, pay it down. If not, why not leave the cash in your offset against PPOR as if paid down? Then if you decide to upgrade/downsize later on you have your Deposit in cash in your offset and your current PPOR becomes next IP.

    Higher IP Rates just means more to Claim. Yes you have to have the money there in the first instance, but that is how the game is played is it not?