Browse Forums Home Finance 1 Mar 29, 2010 12:42 am Hi All, I'm positive that there is a thread already in existance regarding this decision! but I need all the fresh advice/ help I can get. I'm new to this house building caper, and mortgage caper. We (the wife and I), have purchased our land, are in the process of finding the design and builder we like, then to organise the finance. What I want to know is, what would be the better way to finance the whole operation? given that we are looking at another month or two for titles to be released, and then another 12 - 18 months for construction and then looking to rent it out for maybe 2 years? Do we go the loan for principal or interest only? Looking at a total of around 520k - 530k tops. Any help would be greatly appreciated. Re: Principal or interest only? need some help/ advice 2Mar 29, 2010 3:18 am I only paid interest while building building heysen4e through SarahHomes at Milang IM THE PROUD OWNER OF DIRT house into council 22/08 Unconditionally approved 25/09 mortgage docs signed 29/09 land settled 09/10 land titled 22/10 start date about two weeks away!!! http://www.mymilangbuild.blogspot.com/ Re: Principal or interest only? need some help/ advice 3Mar 30, 2010 11:11 pm Uncle Tonsky, Ensuring your loan is structured correctly from the beginning can save you thousands of dollars later on. Since you already know that you are going to be renting this place out, need to go with an interest only loan so you gain the maximum tax advantage. Depending on where you are currently living, you could also maybe avoid CGT on this property but would need a lot more detail before getting into that. The way you would look at structuring your loan, and I'm assuming you already own a property in which your living in, that you set an offset account up attached to your O/O property and the I/O for your investment property. I personally would also make your O/O property I/O as well as later down the track you may like to use that as an investment and hence would again be able to get the maximum tax advantage. Re: Principal or interest only? need some help/ advice 4Apr 20, 2010 5:44 pm Almost all home loans are interest only during the construction stage. In addition to this redraw is usually "locked" during construction so features such as an offset account will come in very handy. If you google offset account there should be a few wesites explaining how they work. It would probably be best to pay interest only and to make all your extra repayments into the offset account. Discuss this with your accountant as I don't want to get into the tax reasons for doing this! Re: Principal or interest only? need some help/ advice 5Apr 20, 2010 9:46 pm agree with glenglen.. for maximum tax benefit make your repayments interest only Re: Principal or interest only? need some help/ advice 6Apr 30, 2010 1:27 pm If you live in the house before you rent it (generally 6 months is a sufficient amount of time) you can claim the property as a principal place of residence (provided you don't own another property which you live in as your principal place of residence) for the next 6 years. Otherwise you will be liable to capital gains tax (provided you make a gain) on the disposal. For full details give the ATO a call or chat to a tax agent. It's worth spending some money with respect to the planning aspect as it may save you money later. Also, don't put excess money into the loan account to reduce it's balance, even if you can access it through cash back. Offset accounts are a much better way to achieve the same reduction in interest charges. Once again an accountant will give you the ins and outs of this. Re: Principal or interest only? need some help/ advice 7May 05, 2010 11:39 pm Agree with 75etd in regards to the 6 year rule for CGT excemption except you only need to prove you lived in the house, that is a utility bill or simular. Every 6 years you can move back in and you may be able to claim the CGT excemption for the life of the loan. If you dont move back in then you may claim part excemption. Google 6 year CGT excemption and I'm sure you will get a fair idea if you are able to claim this. Thank you so much for the effort. We will use it to talk with builder. We also had idea of building duplex instead and seeking suggest ions. viewtopic.php?f=31&t=106744 11 13843 Hi VK, I am now retired however I have stood beside over 300 owner builders in the past 18 years that have successfully built their own homes. First of all a building… 10 22671 Levelling compound Ardit is the best but buy a bag of sand and make sand dam to protect your wood floor 2 15253 |