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Noel Whittaker answers your questions

By InvestSMART · 14 Apr 2012

By InvestSMART ·
14 Apr 2012

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Noel Whittaker answers your questions

I earn $80,000 in a good job and love the location of where I live but not the house itself, which is worth $245,000. My home-loan repayment is $2000 a month and I pay $995 a month in child support. I have $30,000 in shares. The house is on a good size block. I'd like to knock it down and rebuild but I'm not sure I can afford to. One option is to build a brick shed on the site to live in, knock down the house and rebuild when I can afford it. Or I could sell the house, move into an apartment and save $600 a month. I could think about building a house later. Any suggestions?

Based on the information supplied, your easiest way out would be to sell the house as is and buy something in the same area. This would allow you to stay in the location you like while upgrading to a better home.

You've mentioned investment bonds before but I'm having difficulty finding information on them. I understand they are a savings mechanism with tax advantages after eight to 10 years. They don't appear to be available from the big four banks. Could you tell me who provides these products?

Almost every investment adviser will be able to offer you a range of investment bonds and these will include the ones offered by the wealth-management arms of the four big banks. Bear in mind that these are a tax-paid investment, like superannuation, and you need to choose an asset mix that is suitable for your goals and risk profile.

Noel Whittaker is a director of Whittaker Macnaught. Advice is general and readers should seek their own professional advice. Contact noel.whittaker@whittaker macnaught.com.au.

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Frequently Asked Questions about this Article…

I earn $80,000 and my house is worth $245,000 with $2,000 a month mortgage and $995 child support — should I knock down and rebuild or sell and move?

Based on the article, Noel Whittaker’s easiest suggestion is to sell the house as it stands and buy something better in the same area. That lets you keep the location you like while upgrading your home and avoids the financing and timing headaches of knocking down and rebuilding immediately.

What are the financial pros of selling my house and moving into an apartment first?

The article notes one practical benefit: moving into an apartment could free up around $600 a month to save. Selling now and downsizing can help you build a cash buffer to fund a future build or buy a better home in the same neighbourhood.

Is building a temporary brick shed to live in while I knock down and rebuild a recommended option?

The reader in the article mentioned that idea as a possibility, but Noel Whittaker recommended selling as the simplest route. While living in a temporary shed is an option, the article indicates selling and buying elsewhere in the same area is the easier path to upgrading your home.

What are investment bonds and how long before they offer tax advantages?

According to the article, investment bonds are a savings mechanism that can have tax advantages after eight to ten years. They are described as a tax-paid investment, similar in tax treatment to superannuation.

Who provides investment bonds and where can I buy them?

The article says almost every investment adviser can offer a range of investment bonds, and these include products from the wealth-management arms of the big four banks. If you can’t find them on retail bank sites, an investment adviser can point you to available options.

Do I need to consider asset mix when buying an investment bond?

Yes. The article stresses that investment bonds are tax-paid investments and you should choose an asset mix that matches your financial goals and risk profile. That means selecting a mix of shares, bonds and cash (or similar) appropriate to how long you plan to invest and how much risk you can tolerate.

Can an investment adviser help me compare investment bonds and other options?

Yes. The article states almost every investment adviser can offer a range of investment bonds and help you compare products. An adviser can also help you pick an asset mix that suits your goals and risk tolerance.

Should I seek personalised financial advice before making decisions about selling, rebuilding or buying investment bonds?

Absolutely. The article notes Noel Whittaker is a director of Whittaker Macnaught and that his comments are general; readers are advised to seek their own professional advice before acting on these matters.