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Paying a large lump sum off loan

Discussion in 'Property Finance' started by Ems, 31st Aug, 2016.

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  1. Ems

    Ems Active Member

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    8th Aug, 2015
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    Perth Hills, WA
    Hi All,

    We are currently paying P&I on one of our Gladstone loans. The property is on the market but we aren't having much interest. Selling will mean a $150,000 loss (I've posted on the general forum regarding our current situation) We can absorb this loss but each month it is unsold it is costing us $1800 (with $1300 being interest only) if we were to put this $150,000 into the loan and cut it in half what would happen to the future payments? Would we still need to pay $1800 (with more going towards principle or would the repayments be lower)

    It could take a while to sell so we are trying to work out other options
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Get some tax advice before doing that.

    Do you have any other non-deductible debt?
     
    Perthguy likes this.
  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Better off putting it into your own home loan if you have one. This will improve your cashflow to get you through these times and is more tax efficient than putting it into the Gladstone one.

    Or offset account could be even better.
     
  4. Ems

    Ems Active Member

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    Location:
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    Yes we have a PPOR in Perth. If I put the money into the PPOR loan then when the Gladstone unit does sell I would need the $150,000 to pay the loan out. We only have the one income at the moment (I'm working in our small business, hubby has a PAYE income) Would it be difficult to take this money out of the PPOR and put towards the Gladstone house?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You would want to try to keep the loan open if you can as you can continue to claim the interest.
    Seek tax advice.
     
  6. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    As DT said better to put it in an offset connected to your PPOR debt for now.

    When the property sells the circa 150k shortfall can be paid from your personal offset account as bank will look at what the shortfall is and in order to be discharged and transferred to the new buyer you will need to pay out the entire loan associated with this property. Also will offset some PPOR debt that will improve cashflow whilst waiting to sell.

    Do you know if you are cross collaterlised with your PPOR or other property as your bank will want to value these as well and if the vals are not what you need could require more funds but hopefully not!
     
  7. dabbler

    dabbler Well-Known Member

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    If you have cash or can get it, as others say, use an offset......would be better offset against PPOR loan.

    The payments will be lower.