Help on Home Loans

Hi

Thinking about purchasing a unit as my calculations show it would be cheaper then renting an equivalent place.

I came to this conclusion using the following formula - interest on a homeloan + yearly rates + yearly body corp + maintenance < yearly rent).

I have no interest in "owning" the unit and would prefere to just pay off the interest. I also would have at least a 20% deposit to avoid any kind of lenders insurance.

Now my question - idealy I want to have an "interest only" loan where I pay off the interest.. but if I see fit.. decide to contribute more to paying off the loan. i.e. right now I'd prefere to put my money into the share market then pay off the homeloan, when interest rates are only 5-6% and I think I can get a 10% return on the share market.

Do these type of homeloans exist for the standard first home buyers looking for a low interest rate and no added mortage insurance or other antiozbargain style fees?

Comments

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    I doubt total annual cost of purchasing a unit would be lower than renting. And you missed water bill as well.

    You can choose a fixed term for the interst only loan, usually below 5 years.

    Share market is for long term investment. Most people think they can outrun depoist rate by investing in share but reality bites, let alone you want to achieve it within one year. Maybe you are more lucky than 99% of other investors.

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    It is for a 1bdroom unit in the particular market I'm looking at.

    I don't want to achieve those returns within one year. I'm saying a long term average of 10% per year. Yes - some years more - some years less. Post people are extremely afraid of the sharemarket at the moment - which I am thankful for - as it allows me to buy cheap shares.

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    Have you factored in other purchase costs such as stamp duty and conveyancing costs etc (if applicable to you)?

    The other thing to keep in mind is that by putting your money into shares, you have to pay tax (either CGT or income tax) on your your earnings where by paying the same money off your home loan or into an offset account will give you a tax free ~5.5% interest saving.

    If you have more than a 20% deposit upfront, can you contribute all of your funds to the new purchase and then take out an investment loan to bring the total loan back up to 80% LVR? That way you can use those funds to purchase shares and have a potential tax deduction on the interest that you wouldn't have previously had.

    One final issue you might run into is minimum unit sizes. Most lenders will have a minimum living area of 50sqm for them to lend against it. There are those who will do less but depending on the size of the 1 bedroom unit it may limit your choices of lender.

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