QUESTION:
I earn $38,000 a year. I have an investment loan of $104,000 remaining on a house, which has fi ve years to run. At present I am paying interest only at $500 a month.
Last year the tax loss on the property was $900, although this will increase next year as it is due for painting and some small repairs. Would I be better off increasing my repayments to $2000 a month and owing nothing in five years, or keep the payment at interest only? I intend to sell the property at the end of the loan.
ANSWER:
There is not much tax to be saved by keeping the loan going, in view of your low income, and I have no objections to your increasing the repayments.
However, if you intend to sell it at the end of the loan, you need to think about the possibility of selling it earlier.
If you can make extra repayments, it should not be a fixed loan, and selling it earlier may enable you to avoid other future maintenance, and also give you funds to invest elsewhere to give you a better return.
