Home News From home to investment

From home to investment

Font size :
Nila Sweeney

Question: I am a first home buyer looking into home loan features available like 100% offset and redraw. When I purchase my first home, I plan to live in it for up to two years and then turn it into an investment property. The next property I purchase will be the one that I plan to live in long term. I want to save as much as I can in the first two years and then use this to go towards the second purchase. I want to use my savings to save me interest during that time but still want to be able to have the maximum tax deduction possible on this property when it turns into an investment property. How is this best achieved?

Answer: A lot of loans will enable you to make extra repayments and redraw for free. This is an excellent feature for owner-occupied properties and non-tax deductible debt and will save you the same amount in interest as a 100% offset account. Paying extra and redrawing for free is a common feature with non-bank lenders that enables you to take advantage of some of the cheapest interest rates around and still use your spare cash to save you interest. The banks, on the other hand, offer the best 100% offset transaction accounts as part of their home loan packages. They do however come with an annual fee and are not likely to set the world on fire with their interest rate offering.

Your accountant will probably advise you to go interest only on your loan during the first two years so that you will accumulate more savings to go towards the new purchase in the future. To save you interest while you live in the first property, you may be advised to get a loan with a separate 100% offset transaction account. You will be able to keep your savings in this account and save your interest while still keeping your loan at the maximum. When it is turned into an investment property, you will receive a tax deduction on interest on the full balance which can clearly be traced on your loan statements. Then when you purchase the second property to live in long term, you can choose a cheaper non-bank loan that still allows you to pay extra and redraw for free. And of course – always seek tax advice from your accountant.

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Mortgage News and Articles

House prices return to more affordable levels in mining towns House prices return to more affordable levels in mining towns

While the end of the mining boom caused property prices to collapse, on the plus side, homes are more affordable again Read more

Borrowers should anticipate a possible rate hike Borrowers should anticipate a possible rate hike Some experts advise borrowers to look for a fixed loan that allows extra repayments so that they can whittle down the balance sooner ... Read more

Why choosing the right mortgage is hard for first-home buyers Why choosing the right mortgage is hard for first-home buyers Many feel overwhelmed by the sheer range of products and interest rates on offer, a new survey reveals ... Read more

Mortgage applications drop in second quarter Mortgage applications drop in second quarter This marks the “beginning” of a downward trend, says Equifax executive ... Read more

More mortgage news and articles

Sponsored Links

Wednesday, Jul 26, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Whether you're a first homebuyer, looking to refinance, or investing, it's important to have the right loan for your needs. Just fill in a few details below and one of our trusted mortgage advisers will contact you.

A quick & easy way to find the right home loan
  • Purpose of mortgage
  • Household Income
  • How much do you want to borrow?
  • How much deposit do you have?
  • How much is your house worth?
  • How much do you still owe on your mortgage?
  • What type of mortgage do you have?

  • How much is your new home?
  • How much do you want to borrow?
  • How soon do you want a mortgage?
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords