In times of uncertainty, the tendency is for people to lock in interest rates, but is this necessarily the right course?
Eye health professionals about to enter the housing market for the first time are being urged to look down the track, and consider their next few property acquisitions.
Since 2008, when the global financial crisis hit, the one message coming out of the financial world is the state of things is not good.
Investec’s Trevor Robertson says that in response to all this uncertainty, many people want to lock in competitive rates for their home loans, and the number of inquiries about the relative benefits of fixed or variable rate mortgages increases.
…it was important for young optometrists and ophthalmologists to think about a number of things other than interest rate movements
But Mr. Robertson said it was important for young optometrists and ophthalmologists to think about a number of things other than interest rate movements – for example, considering their second home when looking to finance their first.
“For example”, says Mr. Robertson, “choosing a 100 per cent offset loan that allows you to preserve the debt while paying it down is an important tax consideration for the future if you move out of your first home, but hang on to it as an investment property.
“For a lot of young medical professionals, it’s something that’s not really on their radar,” he explains.
Tax implications
“Many young health care professionals will buy an apartment as their first home. Often, they’ll have a plan to keep it as an investment property, but will find, when they do so, that it causes them a tax problem.
“If you borrow AUD$400,000 for your first home, and pay down half of it, then buy another property and hang on to your first one as an investment property, you can’t claim a tax deduction on it,” he explains.
“So if you think your first home may be an investment property going forward, what you should do is leave the initial loan at AUD$400k, and accumulate your repayments in a 100 per cent offset account, so the loan amount is the same but you’re only paying the interest. You can then use the money accumulated in the offset account to buy the next property.”
But the choice of mortgage is more than just an either/or scenario, Mr. Robertson said.
“There are a number of mortgage types including; standard, basic variable, fixed, split or introductory rate, no-deposit loan, interest-only loan, line of credit loans or offset accounts. Finding the right option depends on your circumstances, lifestyle and financial goals.”
He said good mortgage advice should cover the benefits – and potential pitfalls – of each one of these types of loans.
“We have over 20-odd years experience in working with medical practitioners, so we know this market in a deeper way than anyone else”.
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