[waterfleckMember@waterfleckJoin Date: 2008Post Count: 9]

November 22, 2008 - 4:07 am

we’re beginning to think about a further option of extending my partner’s home to accommodate my family, with both of us retaining full ownership of each of our homes separately. He would build the extension himself at a cost of around $150,000 and increase the value of his home by as much as $200,000.

My partner explained that it was only because I had mentioned wanting to eventually build our own home together that he was proposing to do that I would be happy for him to increase the value of his own home and make life more relaxed all round. Even so, he remains confident he could comfortably afford to build a new home and that it would be financially viable.

I think we’ll let this rest a while and possibly revisit it some point in the not too distant future. It would most likely mean losing the opportunity to purchase a block of land that has dual occupancy approval and a number of other features that make it very good value for money.

Thank you for all your comments and good wishes.

Much appreciated

[waterfleckMember@waterfleckJoin Date: 2008Post Count: 9]

November 20, 2008 - 12:27 pm

Thank you. I appreciate your outlook as it’s always helpful to have a range of opinions when making such a major decision.

I’m wondering what could be considered a fair percentage share of the jointly owned property that both homes would be used as security to borrow against. Once the house is built, the property could be valued in the vicinity of $900,000. My contribution to the mortgage repayments would be 20%, while my home used partly as security could be put on the current market at $430,000 (as recently advised by a real estate agent). My partner’s home is currently valued at around $550,000.

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November 20, 2008 - 1:15 am

You're right that there needs to be some serious savings behind us to cover the possibility of him not being able to work for several weeks or months at a time.

[waterfleckMember@waterfleckJoin Date: 2008Post Count: 9]

November 20, 2008 - 1:09 am

My partner is earning serious Ching Ching, whereas my income is modest. 

His tenant on his rental property in Wollongong just signed a 12 month lease, so all is going well there.  I'm in Canberra where there is a rental property shortage, so I'm confident of finding a tenant for my place.  My partner intends to purchase a property in Adelaide for his daughter to live in who is just starting a family.  

My partner mentioned having unemployment insurance.  As my share of the mortgage for the house we build would be around $250 a week, that's affordable for me.  Once a second house is built on the property and rented out, that would be further reduced.  

Working off my partner's figures, he has projected monthly mortgage repayments for five homes to be $12,273.  Rental income from those properties would be $7,200 per month.  That's a shortfall of $5,073 per month, or $1,268.25 a week.  At the moment, he can comfortably make that repayment of just over $1,000 per week (less my contribution).  He is also confident of his ability to stay in work over the coming years……. but therein lies the risk, as you rightly point out!  The question being that if this occur, could we sell those properties and secure my home? 

He expects costs of $9360 per year and a tax return of around $13,800.  That leaves a balance of $4440 per year.

[waterfleckMember@waterfleckJoin Date: 2008Post Count: 9]

November 19, 2008 - 9:47 am

I appreciate the helpful comments. Can anyone recommend where I could find good financial advice? This is something my partner was also encouraging me to do.

On the subject of real estate investment, does anyone have any thoughts on what the best options might be at the moment? Is it a good time to invest for the long term if you can afford it, or are there too many risks involved should housing prices suddenly plummet? Is it better to be conservative right now and wait for the market to settle?

[waterfleckMember@waterfleckJoin Date: 2008Post Count: 9]

November 19, 2008 - 12:24 am

I don't mind you saying that all, bespoke.  I appreciate being as well informed as I can be and you've given some very good advice.

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November 18, 2008 - 11:59 pm

Thanks for that, Foundation.  My partner was us to see a solicitor together to find out what is possible first and for me to seek independent legal advice afterwards.  The reason I'm here is that he wants me to ask all these questions independently, so I'm not giving him strange looks all the time

We'll need to raise that point with the solicitor though since in the advent of bankruptcy, the banks would have the first claim.

[waterfleckMember@waterfleckJoin Date: 2008Post Count: 9]

November 18, 2008 - 11:56 pm

Thanks, Richard.

Here is a rough outline of our situation and known options.  Please let me know if it is too much information or unclear and I'll edit it straight away.

I currently have a mortgage of $238,000, equity in my home of around $200,000 and other debts of $15,000. I'm told this is very modest. My bank is willing to personally loan me up to $325,000.

I really can't afford to continue paying my mortgage on my own for much longer, so I do need to look at doing something.  My partner wants me to keep my home, rent it out and live with him until our home is built towards the end of next year.  Rental income from my home would cover my mortgage.

Apart from the home he lives in and wanting to build together, he owns one investment property he purchased last year and is wanting to buy another investment property over the coming months. The only property in joint names would be the property we purchase together.  We haven't yet figured out what my percentage share of the property would be. 

To purchase the land and build a house we expect to borrow $700,000.  This would mean that jointly we would have debts over $1.7million and assets of around $2.4million. My share of the mortgage repayments would be around 20% .  Mine and his homes would be used as security to borrow the $700,000.

He would like to build a second two bedroom home on the 10 acres and rent it out for additional income.

The financial benefits could be enormous and I could possibly own my home outright within seven years if managed well. Because of the number of properties we would jointly own, any of them could be sold if we got into financial trouble. My partner is assured we would always be ahead, although he is wanting us to sign a legal agreement beforehand stating that if there were signs of an impending bankruptcy, my house would be secured.  His aim is that we would retire comfortably and our children be well looked after.  These are big figures though, and I'm use to be very conservative with money.  Given the current housing market is so uncertain, other options I have recently considered include:

1. sell my home and repurchase something around $330,000 to reduce my mortgage and be debt free. This would ensure I could always afford my mortgage. However, I'm told it would cost me around $30,000 to do that and isn't the smartest thing I could do.

2. keep my home and rent it out. Rental income would cover my mortgage. Live with my mum lol!

3. sell my home and purchase a house to the value of around $480,000….. something with a flat attached that can be rented out. I saw a house like this online the other day that given the rental income, would make my mortgage much cheaper than it is now.

There are probably other options I haven't thought about……..

Behind these decisions are how they effect our children, so timing and the ultimate decision will depend a lot on them.

Any advice you have would be appreciated. Thanks very much.