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PPOR now IP-What strategy should I use?

Discussion in 'Investing Strategies' started by Irons78, 31st Jul, 2014.

  1. Irons78

    Irons78 New Member

    Joined:
    31st Jul, 2014
    Posts:
    2
    Location:
    Perth
    Hi

    My PPOR has now turned into an IP ? I have a fixed loan of approx $170k and a variable loan (VL) of approx $135K ? In this VL I have approx $30k available to redraw ? I currently have approx $70k in savings. I also have an offset a/c to use if necessary.

    I'm unsure whether to continue using my existing savings in the offset a/c and pay off the loan (I currently have the capacity to pay $3k per month in addition to my mortgage repayments) but I believe as a result of this method, it will reduce the loan interest and each year my income tax will potentially increase. I believe my other option is to use my existing savings and put them in a high interest savings acct (solely in my de-factos name as they are currently below the Income tax threshold) and deposit my additional monthly savings there, thereby the loan interest remains as high as possible for a better tax deduction and I will also pay minimal income tax on the savings earned.

    Secondly, if I use the savings acct method, is it better to redraw the $30k and deposit that into the savings to increase my interest? I also believe that I can only use the $135k portion of the interest on that loan as a tax deduction even though the loan in effect would increase to $165k.

    Thirdly, if I use the savings acct method, is it better to change the VL into a FIXED loan and avoid the yearly $350 package fee? If I do this and later change my mind/strategy their will be bank fee/costs to pay.

    Your help is greatly appreciated.
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    Best not to pay down an investment loan as it ties up your money.
    Parking cash in the offset would save you the same interest anyway.

    As for investing in defacto partner's name make sure this is properly documented - loan or gift. Work out the tax benefits of you investing in a 5% offset account and paying more than than investing in a 3% savings account and paying now tax.

    Don't redraw (=borrow) the $30k as the interest won't be deductible
     
  3. Irons78

    Irons78 New Member

    Joined:
    31st Jul, 2014
    Posts:
    2
    Location:
    Perth
    Thanks TerryW, I have decided to take the action of paying off my mortgage at an acceraletd rate. Thank you for replying.
     
  4. Dezz

    Dezz Member

    Joined:
    27th Jan, 2016
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    Location:
    Toowoomba
    Check out other thread in this forum titled "Cantebury investment services"