All Topics / Help Needed! / Could I Take The Plunge

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  • Profile photo of never too latenever too late
    Member
    @never-too-late
    Join Date: 2009
    Post Count: 18

    Hi to all,

    Another newbie and novice indeed.Two questions…

    #1 I was wondering if I could ever get into buying my first IP.
    This is my situation. I am a single mum with a low full time annual income of 33k plus around another 12k p/a with various gov benefits. I have around 230k of equity and 10k of c/c debt. Would it be likely that my bank would let me use my equity to buy a cheapie (fibro) in good growth suburb where I live on the (Mornington Peninsula).What do you think? I have been dreaming about this for years whilst building equity.
    #2 If I got knocked back ….Is there a register anywhere that would support like minded people doing a joint venture together, to share the costs, experience,excitement,the ups and downs and after all most importantly reap the rewards by getting a start. All drawn up legally of corse. Your thoughts would be appreciated .        Looking forward to your responses…….Jane

    Profile photo of bjsaustbjsaust
    Participant
    @bjsaust
    Join Date: 2009
    Post Count: 141

    I'd knock down the $10k CC debt first. Not only do you actually need to service it, but even if you paid it off the banks will still assume you need to service a fair portion of it. Cancelling or at least greatly reducing your credit limit would help a lot.

    Btw, thats nice equity built up on that income. Nice work :).

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Jane

    Equity can be often be king as lenders will advance funds on the basis of equity alone with very little income confirmation.
    Also bear in mind that not all lenders take all government benefits into consideration.

    In saying that of course just because we could arrange a loan doesnt mean that you should take it up of you feel you cant afford it. Personally subject to the numbers I would be looking to roll the credit card debt into the home loan and then carry on the repayments at the same level as previously to reduce the debt as quickly as possible.

    It is hard to provide you with an accurate assessment as there is insufficient actual data but with a few more figures i can advice you further. 

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674

    On your question about joint projects you might get some benefit from networking with other like wise investors.
    There is an investor meeting group that meets every month in Blackburn North.
    see
    http://www.activepropertynetwork.com.au/

    Profile photo of never too latenever too late
    Member
    @never-too-late
    Join Date: 2009
    Post Count: 18

    Thanks everyone.
    You're all absolutly correct to say to get rid of the c/c debt first. I knew that had to go but was wondering anyway with 230/40k in equity and only 32k left to pay. I have always still kept paying my loan amount as if it was still 7.74% so I have done well there. I only have 4 and a half yrs to go and I will own it in 12 yrs. I whave already trippled my money in 7 and a half yrs.
    I need to start supplementing my income although I manage ok. I can probably manage to pay another 100.00 per week towards it. It wont take long. I will come back and talk to you all again whence it is a 0 balance . Thanks again  Jane

    Profile photo of KennyjaizKennyjaiz
    Member
    @kennyjaiz
    Join Date: 2009
    Post Count: 69

    Hi Jane,

    Quick question.
    Presumably you have a much higher interest rate for your 10K credit card debt than you mortgage?!
    Is there any particular reason why you are paying down your mortgage as opposed to your credit card debt as a priority?
    However, I Commend you on your dedication and motivation to financial freedom! I imagine it to be difficult in your shoes. Good on you!

    Just a thought!?
    Kenny

    Profile photo of never too latenever too late
    Member
    @never-too-late
    Join Date: 2009
    Post Count: 18

    Hi Kenny.
                     Good question.. Reality is I guess I have liked spending money in the past. I will try to start my new path in life as of now. Cheers and thanks for the post.
     Jane 

    Profile photo of never too latenever too late
    Member
    @never-too-late
    Join Date: 2009
    Post Count: 18

    I have never been more ready than now to take the plunge. I am happy to wait till I have my bad debt paid out. I have recently been able to start to add an other $100.00 p/w towards the c/c debt. I have managed to make repayments with ease so far and expect that I could take on more now. This is a really cool site and I know it will continue to encourage me to find my own personal financial freedom step by step. 
       Jane…….Ps ……keep up the good work site managers!

    Profile photo of KennyjaizKennyjaiz
    Member
    @kennyjaiz
    Join Date: 2009
    Post Count: 69

    Hi Jane,

    It doesn't really matter how you got yourself in your current situation. And given that you've managed to accumulate 230K equity, you've don't pretty well for yourself.

    Two importants Steve M. mentioned:
    1, Before you lauch yourself in the fantastic world of property investment, you need to make sure you are equipped to manage your money. If you don't think you can handle a small amount of debt, there's little chance you can miraculously handle hundreds of thousands of dollars of debt
    2, If you do more of what you've done, you'll just get more of what you've gotten. (ie start doing things differently)

    I think Steve's books will be good literature for starters. (shameless plug)

    The reason I asked about the credit card debt is, there maybe solution to it.
    You mentioned that you kept paying down the mortgage as though it was still 7.74%. I'm assuming you are implying that your variable interest rate has reduced, and yet you kept putting in the same amount as previous?! Which means, instead of paying more of your mortgage (which is probably a lot less than your credit card rate), you can reduce your highest rate debt quicker.

    EG.
    Credit card rate: 20%
    Mortgage rate: 6%
    For each dollar you spend on reducing the credit card debt, instead of your mortgage, you will be saving 14% p.a. on the dollar

    There are several other options you can consider.
    1, consolidate your debt, by doing an increase on your mortgage (assuming by equity, you mean property equity) and pay off your credit card (maybe you can do it while you are taking out out a deposit for an investment property, but before you do this, you should assess it with professionals like accountants and mortgage broker, if this is the best option for you)
    2, consolidate your debt by taking out a personal loan with a rate lower than your credit card rate (note, you need to be vigilant so you don't build up the cc debt again)
    3, transfer your credit card debt to a 0% interest rate for 6 months to another credit card (it's legal, but not good if you do it too often)

    Note that comment made above are general in nature, and it may not be suited to your personal circumstance, so please seek professional advice before taking any action.

    Good luck with your search
    Kenny

    Profile photo of never too latenever too late
    Member
    @never-too-late
    Join Date: 2009
    Post Count: 18

    Have always managed to cope in life, never been one to save till now uless for something specific and then managed well.  Always spent what I earnt. Always had what I wanted (within my means), which has left me nothing for the future but boy have I had a good life so far. Want to try new life style. One where money is a little more plentiful. I have potential. As I mentioned I have trippled my money in seven and a half years so the sky is the limit. Yes I am cocky but I have to be a shrinking violet no more. lol. Ps…….need all the help I can get…

                                      Jane 

    Profile photo of never too latenever too late
    Member
    @never-too-late
    Join Date: 2009
    Post Count: 18

    hey Kenny thanks,

    The c/c debt and the extra in mortgage payments was a fantastic idea but sadly I now think I have missed the boat as home loan rates will be up again before I can get to the bank. So maybe it's still a good idea to put the c/c debt in to the HL debt. ie… do no 3 first, transfer to another and get the 6 months intrest free , then pay off my $100.00 extra to the debt ,then after 6 months transfer it to the home loan . Does that sound right.?

    Profile photo of KennyjaizKennyjaiz
    Member
    @kennyjaiz
    Join Date: 2009
    Post Count: 69

    Jane,

    I'm not quite sure what you mean by your first statement –
    "The c/c debt and the extra in mortgage payments was a fantastic idea but sadly I now think I have missed the boat as home loan rates will be up again before I can get to the bank."
    The fact that home loan rates can go up for you, you are implying that you are on a variable rate? yes?
    Just to reiterate what i mentioned before. Keep on paying the very MINIMUM of what you need to, to satisify your mortgage repayment. (ie, if bank asks you for $1000, just pay the minimum, and anything else should go into reducing your credit card debt)
    The home loan rate increasing should not affect this?!?

    The solution you choose, should be one that you feel comfortable and empowered!
    What you proposed sounds logical :)

    Hope it works out for you.
    Kenny

    Profile photo of never too latenever too late
    Member
    @never-too-late
    Join Date: 2009
    Post Count: 18

    Ta again Kenny,

    Both loans are with different banks, I will have to talk to my HL lender….eekk. but will do. It is logical.Cheers.

    Profile photo of bjsaustbjsaust
    Participant
    @bjsaust
    Join Date: 2009
    Post Count: 141

    Is there any reason you cant just pull $10k off the homeloan and pay off the credit card and then cancel it?

    That way you're paying the 6% on the $10k rather than whatever your CC rate is.

    It also then means you have $220k equity and no CC debt which is better than $230k equity and $10k CC debt from a lenders point of view.

    Profile photo of never too latenever too late
    Member
    @never-too-late
    Join Date: 2009
    Post Count: 18

    hi bj , have never inquired about putting the extra c/c debt on the HL as I was only given 12 yrs loan term on the mortgage ,not sure if they will give me extra time with the extra 10k added to it. I will make some enquiries. ta

    Everyone has given me a few alternatives to getting rid of the bad debt. I will do something asap. Thanks to all for your time……..Jane

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