pay off PPOR or refinance

[buzzybee]

Hi, I have about 80g owing on my PPOR. I am considering paying 50-60g towards this from profit I made from a recent IP sale. Just wondering whether I should do this or refinance another of my IP's to pay off this debt instead. Anyone done this sort of thing?

I also have a property I own which my mum lives in. Any benefit to me to make this an 'IP' for taxation purposes when it is actually paid off (which it is just about)

Thanks

[Michael Yardney]

Hi, I have about 80g owing on my PPOR. I am considering paying 50-60g towards this from profit I made from a recent IP sale. Just wondering whether I should do this or refinance another of my IP's to pay off this debt instead. Anyone done this sort of thing?

I also have a property I own which my mum lives in. Any benefit to me to make this an 'IP' for taxation purposes when it is actually paid off (which it is just about)

Thanks

Why pay off the loans at all?

Look at it this way for every $20,000 you pay off your loan you save 7% the interest or $1,400 per year.

If instead you used the same $20,000 as part of a deposit on another investment you could borrow a further $80,000 against this allowing you to buy $100,000 worth of investment.

If you bought the right property, your return (over time) could be 10% capital growth and 4% rental return per annum - 14%

You expenses would be 7% interest and a further 1% outgoings total 8%

Your net return is 6% or $6,000

For every $20K you payoff your home you are forgoing $4,600 per annum ($6k - $1.4K savings) or $88 per week.

[buzzybee]

Hi Michael, it is my PPOR i am talking about, and it is costing me around 450 a month currently, which I can't claim anything on of course. I'd rather flick this loan over to one of my IP loans, than pay it out from my own money. What do you think?

[Michael Yardney]

Hi Michael, it is my PPOR i am talking about, and it is costing me around 450 a month currently, which I can't claim anything on of course. I'd rather flick this loan over to one of my IP loans, than pay it out from my own money. What do you think?

I understand it is your PPOR that's why I am saying you save the 7% interest on it.

My point is that using these funds better - earning more form the funds you would you to pay your non deductible mortgage would seem sensible

[muppet]

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[Rolf]

If instead you used the same $20,000 as part of a deposit on another investment you could borrow a further $80,000 against this allowing you to buy $100,000 worth of investment.

Why not do both - pay the $20k off the loan and still borrow against the increased equity?

[buzzybee]

Thanks everyone for enhancing my thinking on this.