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Which initial IP loan should I get? No PPOR

Discussion in 'Property Finance' started by cooldudedavo, 18th Apr, 2016.

  1. cooldudedavo

    cooldudedavo New Member

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    Hi guys,

    I've been reading a lot of optimum loan setups for people with PPOR + IP's, with preferably P&I + offset on the PPOR, IO on the IP's to maximise tax deductions. I'm finding it hard to find the best way for people to start out who are living at home with my parents (and will do for a while).

    If your plan is to first buy an IP while living at home, then in a few years look towards buying my own PPOR, what kind of loan would you get on the initial IP?
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    IO with offset - all day everyday. Unless you're terrible with money.

    Place all your spare cash into the offset.

    When it comes time to purchase your PPOR - use the cash from the offset to cover the deposit/costs.

    Cheers

    Jamie
     
  3. cooldudedavo

    cooldudedavo New Member

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    So after a few years, after purchasing a PPOR with P&I as my second purchase, would I want a second offset to go against the new PPOR?

    Or would I restructure in some way the offset against the first IP?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Borrow 105% if you can.
    80% secured against the new property and 25% deposit and costs from elsewhere - parents if you can.

    IO on both.

    Store your cash in the offset and when the value jumps refinance the 25% loan and pay back your parents.
     
  5. cooldudedavo

    cooldudedavo New Member

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    Thanks for the replies guys, appreciated.

    Definitely crunching some more numbers tonight.
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    You'd get an offset against the new PPOR, and put all your offset cash into that.
     
  7. House

    House Well-Known Member Premium Member

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    Would you recommend going for 5 or 10yr IO at first?

    I know post APRA the borrowing power has changed significantly between 5 and 15yr IO loans but is there much of a difference between 5 and 10 years?
     
  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Generally go for the longest you can get.

    Cheers

    Jamie
     
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  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I would have phrased that differently Jamie.
     
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  10. househuntn

    househuntn Well-Known Member

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    What about at the end of the IO period, when the repayments are likely to go up?
    Loan Tip: Ticking Time Bomb of Interest Only Loans Expiring

    Is the idea to
    (a) refinance to another IO loan (which may be higher rate in future),
    (b) reset the loan term by switching lenders?
    (c) accumulate money in offset so if I have to switch to PI, it will reduce the repayments?
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Could be any of those as well as:
    d) extend the IO period with the same lender.
     
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  12. househuntn

    househuntn Well-Known Member

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    Is an offset account kind of like a savings account? My understanding is that I put my salary in there to reduce interest repayments, but I will need to withdraw some money sometimes for living expenses?
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    An offset account is a savings account. The only difference is that it doesn't pay interest, but saves you interest on the loan instead.
     
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