January 10, 2022

#135: The L to P of property success: "LMI" what is it and how to reduce it, critical "Mortgage" strategies, "Negative" gearing and making i

34 minutes

https://propertyplanning.com.au/propertyplannerbuyerprofessor/ In this week's episode Dave, Cate and Pete take you through: L - Lenders Mortgage Insurance (LMI) LMI is a type of insurance you can expect to pay if you borrow more than 80% of the property value. Although you pay for it, it protects the lender, not the borrower as above 80% lending is seen as higher risk for the lender in the event of mortgage default and subsequent mortgagee sale. The trio discuss how the insurance premium is calculated, what kind of borrower is likely to have to pay this fee and how you can reduce LMI surcharges. M - the critical components of your Mortgage The Property Planner takes you through the top 6 mortgage strategies that can greatly impact your wealth and ability to hold property as you grow your portfolio N - Negative and neutral gearing Negative cashflow simply means that your investment is running at a loss from a cash flow perspective. This is because the rent earnt doesn't cover property costs, such as interest paid and maintenance. Negative gearing relates to the tax benefit applied to reflect the investor's cashflow losses. Although you get a tax deduction, negative gearing is not necessarily a positive thing. It should be considered merely a benefit, as opposed to a reason to invest. Negative gearing means you pay a dollar to get 30 cents or slightly more back from the tax man. The trio discuss the dangers of selecting a property based on tax benefits alone. O - Offset accounts, God's gift to mortgage strategy! The offset account is arguably the banks' greatest invention. Effective use of offset accounts forms the basis of many of the mortgage strategies that can enhance your wealth creation such as money management, optimising tax deductions, risk management and the ability to hold onto your home when you upgrade. Take a listen to episode #48, a whole episode dedicated to the effective use of offset accounts. P - Positive gearing Positive gearing is essentially the opposite of negative gearing. It is where income earnt from your property covers more than the expenses. A positively geared investor will pay additional tax; a nice problem to have. The trio discuss how gearing is not static and can change over time. It is normal for a property to become neutrally and then positively geared over time. Take a listen to find out why. Visit the show notes: https://propertyplanning.com.au/the-l-to-p-of-property-success-lmi-what-is-it-and-how-to-reduce-it-critical-mortgage-strategies-negative-gearing-and-making-it-work-for-you-ef/

...more