Hello forumites,
Here is my situation. We have a PPOR in Sydney, (owe 250k – worth 325k) currently paying $1645 p/m.
My parner was made redundant late 2007, we used her payout on mortgage as well as freeing up some other small debts. Our IP in Adelaide is currently tenanted at $230 p.w. We paid 235k – worth 265k.
We're currently topping up the SA loan by approx $90 p.w.
Bottom line is we're finding it harder to sustain our mortgage as I earn $759 p/w.
There's just not much money left at the end of the week…….would you sell the SA property?
Any help is greatly appreciated.
PaulIs your wife not working a short term thing? Can you cut back on your lifestyle somewhere? If so…
How about trying the hard and fast rules first…
Contact your institution. Can you refinance? Can you reduce or put a stop to payments for a couple of months until your wife is back in work? Most institutions will be able to do something if you're having problems and you tell them fairly soon after they begin. The quicker you do it the more room you'll have.
Can you get a cheaper rate somewhere else?
Are both your mortgages with the one lender? If not, shop around for what banks / financiers will do for you if you bring both of the loans. May get you nowhere, may get you somewhere…
It doesn't sound like this is going to be a long term situation – I'd investigate all options before selling the IP… Remember, the last thing a bank wants is their customers out on the street – everybody loses…
Hi Paul
A question.
Is your partner planning on working again?
If that answer is yes then do not sell IP as Adelaide has not finished its growth cycle. If answer is no then same applies.
You would be far better to arrange a redraw/equity/LOC on this IP to cover the short fall (just dont blow it on non-investment items) as the IP should appreciate at greater than $90pw.Yes you can argue that your using debt to service debt and I will argue that is only $90 pw which is less than a carton of cigarettes or whatever you want to compare it too.
This is the same with your Sydney PPOR as the Sydney growth cycle is about to commence also in the not to distant future and you will be sitting pretty.
Work out a way why you can keep them as opposed to why you cannot. Bottom line is dont sell and let time do its thing.
Hi Paul
Don't sell.
Your comment "there is not much money left at the end of the week" means that you are able to meet your payments.
Tighten your belts just a little and you will be OK. You don't have to have ANYTHING left at the end of the week, so long as you are paying your way then you will be fine.
Can your partnet get even part time work to tide you over? It may not be an ideal job, but even $100 coming in would cover the IP. Telemarketing? Local supermarket?
Is your IP on interest only? If not, can you switch without too many costs?
This is a temporary problem, selling your IP is a permanent reaction.
Good luck
MargTo those already who have replied, thankyou.
I didn't mention in my original post that, of the money left over after paying the loan payments each week, (approx $210), still have to take out groc/petrol and h/hold debits.
I can see the long term gains by keeping the IP going, I'm just running out of money!!
My wife is trying to get back into the workforce again, she's 51 now so the offers aren't exactly pouring in.
The one saving grace on the IP was I had the foresight when purchasing to fix at 6.75% for 3 years, 1 year to go with that rate.
I've got .7% discount with my PPOR so that's not really the issue.
Paul.Hi Paul
Is the IP loan interest only? You could also make your PPOR loan interest only as this would help reduce payments.
You may also be able to increase your PPOR loan to 80% LVR and to pay some of the investment expenses from that increase – but based on the values given, you may be only able to increase it by $10,000.
If all of this doesn't work and you cannot keep up, then you may be better of selling. Don't leave it to the last minute so you won't be pressured to accept a low offer, put it on the market sooner and hold out for more.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hello Paul
My sister was older than your wife when she had to start job hunting. She started in telemarketing but has since found two part time jobs that she likes better. It's just a matter of not giving up.
I would also advise keeping both properties for the reasons already mentioned.
Given your ages I assume you have no children living at home with you any more. One possibility to investigate is whether, at least for a couple of years, you may be better off renting out your PPOR and renting something smaller/cheaper for yourselves. Not only will your living expenses be reduced but you will be able to claim all the expenses associated with your home ( interest, rates,water,insurance etc.) against your tax as well as depreciation which is not an "out of pocket" expense.
You can rent out your home for up to 6 years without effecting it's CGT free status. In fact if you move back in for a few months before the 6 years are up and then move out again, you can start the 6 years all over again if you want to.
Renting out ones home is a very emotional decision that is harder for some than for others but it's worth considering. Check what you could get in rent for your home and what you would have to pay to rent something you could live in then sit down with your accountant and work out the tax advantages of the now deductible expenses on your home.
Below is a link to a post by Mortgage Hunter that stuck in my mind for several reasons.
https://www.propertyinvesting.com/forums/property-investing/creative-investing/25308?highlight=china%2Cebay&page=1#comment-142103Best of luck with whatever you decide to do
Elka
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