Saving up for a dream home at a dream price

MY wife and I are in a quandary. We have $80,000 in a bank savings account, $20,000 in shares and we aim to save $4000 a month, which is 35 per cent of the $11,000 we take home each month. We’d like to buy a house, but feel the market is too hot in the places we want to live, and also feel like our money is going to waste in the bank. Would you suggest we take the punt and buy a house up to about $850,000? Or continue saving until we find our dream home (at our dream price)? Or should we do something completely different?

Congratulations on how well you’re doing. I always feel home ownership is a worthy goal, and have always told people it’s often best to “bite off more than you can chew and chew like hell”. I think you should continue to save furiously, but take the time to research the market in depth so you will know a bargain when you see one. Ideally it would be good to have $170,000 deposit to avoid costly mortgage insurance, but you need to weigh the cost of mortgage insurance against any increases in house prices that may occur while you’re saving. I HAVE $238,000 redraw available on a mortgage loan for an investment property that is positively geared. Can I use the redraw facility on this loan to withdraw these funds to buy another investment property?

Provided the money redrawn was used to buy an income producing asset, the interest would be tax deductible. MY wife and I are both part pensioners with an annual income of $40,000 and assets amounting to $600,000. Unfortunately, my wife has a terminal illness and probably has less than 12 months remaining. I would like to retain my single pension. I can reduce my assets by buying funeral bonds and gifting $10,000 to our children. If my wife bequeaths $20,000 in her will to our children, will Centrelink view this as a deprived asset and count it as among my assets?

Any asset that is bequeathed to a beneficiary in terms of a will is not treated as a deprived asset. Obviously, you will need to take advice around estate planning in its entirety, but your proposed strategy appears to make sense.

‘If my wife bequeaths $20,000 in her will to our children, will Centrelink view this as a deprived asset’

IF selling shares generates a capital loss and this loss is used to offset a capital gain on sale of other shares in a tax return, is this offset amount added into adjusted taxable income for Commonwealth Seniors Health Care card purposes?

This card is subject to an adjusted taxable income test plus any deemed amount from account-based income streams. There is no assets test. Your adjusted taxable income is the sum of taxable income, taxable foreign income, total net investment losses, employer provided benefits, and reportable superannuation contributions. Capital losses claimed do not have to be added back – only the net capital gain is counted.