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Please help, need some hints!

Discussion in 'Investing Strategies' started by Sunshine rach, 19th Aug, 2014.

  1. Sunshine rach

    Sunshine rach New Member

    19th Aug, 2014
    Hi everyone,
    I'm new to the forum and would love some help with some investment decisions.
    We have recently turned our PPOR into an IP. We have paid off $70 000 of a loan of $300 000. The current loan is P and I loan. My questions are:

    1. Should we change the loan to an IO loan? (Costs to do this are minimal)
    2. Should we move the $70 000 into a managed fund and put the 'extra' money that we are currently paying off on the principle of the IP into that each month?
    3. Is it better to have the IP in the name of the highest income earner only?
    4.Would it be best to have the managed fund in the name of the lower income earner as it would be positively geared?

    Am I completely off track and clearly have no idea!?
    Constructive advice would be great please!!
  2. GregR

    GregR Well-Known Member

    13th Jul, 2009
    Berwick Vic
    If you have moved out of your 'old' PPOR and converted this to an IP, where are you now living?
    As to whether to continue to pay off the IP via a P&I loan or convert to IO depends on your goals. If you just intend ever owning one IP, then reducing debt may be a good idea, wealth is assets less debt so the timing of building assets or reducing debt depends on your goals and where you are in your earning life cycle.
    It may also depend on your marginal tax rate (MTR) to an extent and your need for cash. Your respective marginal tax rates will also have an influence as to whose names investments should be in, by all means take advantage if you can of different MTR's but make sure the cost is less than the benefits gained.

    If you take out $70k from your redraw, this becomes a new loan purpose, so not sure how you work out that putting this into a managed fund becomes positively geared. Do the numbers to see which is a better return, leaving it in the mortgage or acquiring another investment asset via managed funds.

    In general terms, a positively geared investment has a greater after tax benefit in the name of the lower MTR earner compared to a higher MTR earner.
    Good luck with the research