NEED
PAU L’S
HELP?SK PAUL
Q
Mypartneris 51 and
earns $70,000 and has
super of $200,000. I am
42 and earn $62,000 (I work at a
not-for-profit and salary package
$18,550), plus investment
property income of $18,000 with
superannuation of $160,000.
We bought our principal place of
residence, now worth $725,000,
three years ago. My partner has
a mortgage of $190,000 with
$20,000 in an offset account and
I have a mortgage of $435,000
with $40,000 in the offset account.
We make weekly repayments of
$266 and $606 respectively and
salary sacrifice $200 and $250
respectively each week into super.
I have two investment
properties (both bought long
before we met and purchased our
own home): one worth $370,000
($50,000 mortgage and $17,000
in offset) and the other worth
$500,000 ($170,000 mortgage
and $85,000 in offset).
Both investment loans are
interest only and payments aremonthly.I hadmistakenlymade
a payment into a redraw account
before moving to a new bank,
so transferred this amount to
an offset account. From what
I understand, I can’t use this to
offset interest on the home loan.
Also, all properties are units
and are in Sydney.
Should I sell one or both
investment properties to pay off
the home loan; use the money we
are salary sacrificing into super
to pay off our home loan; or
invest in shares, even though
we don’t know much about them
but would like to diversify?
We would both like to work
part time at 60 – or not at all
if we can afford it.Sadly, Chris, you can’t offset
your home mortgage interest
against income from investment
properties. The big plus of your
own home is that there is no
capital gains tax if you sell, but
the interest on your mortgage
is not deductible.Vickihasa decadebefore 60
and you have close to two decades,
so the real issue is that you contin-
ue to save.
With a pretty decent property port-
folio, Chris, I’d suggest you continue
with interest only on the investment
properties and I like your strategy of
adding to your offset account on your
mortgage and topping up your super-
annuation via salary sacrifice.
At some stage, selling an apart-
ment may make sense, but in the
current property downturn I don’t
think this is the right time. Our big
cities such as Sydney are seeing
rapid population growth and over
time I would argue this will see
property prices recover.
The key for you both is to continue
to save and invest. Clearing out your
mortgage by the time you retire is a
key goal. Your super, with employer
contributions and your own top-ups,
will benefit from compound returns
over time. Your investment proper-
ties also should show growing rent
and value. So with plenty of years to
go, I think you are both tracking well.ChrisandVickishouldreachtheirgoalif they...
Send your questions
to:
Ask Paul, Money
magazine, Level 7,
55 Clarence Street,
Sydney NSW 2000 or
money@
moneymag.com.au.
Sorry, but Paul can’t
personally answer your
questions other than
in the Q&A column.
By submitting your
question to Money,
you consent to having
your question and the
response you receive
from Paul published
in the print and digital
edition of Money.Continue to save and invest
Q
&
A
AS