I am emailing as I need some advice and a little bit of positive luck in life right now
In this email I have briefly outline my current situation and see if there is anything you can suggest / help. Here is the situation.
Our home in Torquay has a valuation of around $835000. We have a first mortgage with Latrobe Financial – interest rate is 9.75% ( I am 5 years ex bankrupt) we also have a second mortgage. Our total loan is $480 000. So we do have an LVR of around 60%. I was self employed but have closed business and seeking new opportunities. What we want to do is consolidate the two loans into 1 loan with a better interest rate obviously. Plus we want to move out of our house and rent it out for the next few years – allowing me us to get back on track in terms of career. We can rent our house out as demand is high for around $600 – $650 per week.
So the numbers are as follows
If we can get a loan for $480 000 at say 8% – that equals monthly repayments of $3200. Rental income at $600 per week equals – $2600. So this scenario would be negatively geared of $600 per week.
If we can get a loan for 7% the difference would be -$200
If we can get a loan for 6.5% it would be neutrally geared.
We can secure a rental agreement for two years.
Now the reason I am approaching propertyinvesting.com is because at present our house is on the market. However the market is very soft especially for upper end properties – which ours to appears to be in. We do need to either sell or rent out. What we are trying to avoid is a “fire sale” so to speak. And the i am half way through reading Steve's McNights book
So do you think you can help? DO you have any ideas / thoughts or options as you are the professional in this space. We do have access to a Guarantor – but it is my understanding that using guarantors is a thing of the past??
Please let me know thoughts etc as this email is completely genuine and upfront
ScottTerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
Were the borrowed funds used to buy the house? If so the interest on the loan may be deductible if the house is rented. So it may pay to move out now and rent something cheaper so you can quickly save some tax.
At the same time speak to a broker about refinancing. It should be possible to get a lower rate at that LVR.
Selling is an option, but what do you think of the long term prospects for the house. Is it likely to increase in value? If not then there may be no point in keeping it. If it could increase then would it increase at a rate faster than what you are losing each month?
thanks for reply
the borrowed funds were to buy the house – has been owner occupied for over 3 years now
the question on long term prospects. well Torquay in Victoria is a beach side town. the town is growing rapidly but so is the land being opened up for new housing estates. the house is 10 min maximum to beach and overlooks the Sands Golf course. So are there any guides I can draw upon to determine growth potential?
And also would any lenders refinance house given technically I am unemployed?
thanks for your time so far
ScottRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
If you are not receiving a PAYG income or in fact have not completed a 2010/2011 Tax Return with sufficient income to evidence serviceability then it is unlikely any lender will consider the application.
In saying this of course it is difficult to comment further with full details of your income position.
Yours in Finance
thanks Richard and appreciate you taking the time to commentZanshibuiParticipant@zanshibuiJoin Date: 2012Post Count: 14
Unfortunately I don't have any answers, however I do think you should go back over your figures, especially since you're looking at a monthly shortfall. As well as bank repayments you'll need to factor rates, landlord insurance, building insurance, maintenance allowance, real estate management costs etc etc, which will bring the shortfall much higher than the estimated $600/week.
All the best
suzePLCParticipant@plcJoin Date: 2012Post Count: 400
Richard is right Scott. However I do notice you do say we a few times in your post. Do you maybe have a partner who's income might help for serviceability?
Also you mentioned 5 years ex bankrupt. Is that 5 years since discharged or declared bankrupt?
Tomaussieguy2000Participant@aussieguy2000Join Date: 2010Post Count: 81
I feel for you and your family, as it would not be a nice situation to be in, but that being said I think you need to look at the reality of it. You are living in a house work twice that of an outer suburbs property in most cities, and you only owe 60% LVR. I really don't want to sound rude, but the reality of it is you are living beyond your means in a rich suburb that you can't afford.
I am currently looking to buy a property for me and my wife and our bub on the way, presently my wife is employed, I am employed and we have 3 IPs, so our chances of getting a property are good. We could probably get a new loan for 6-700k, and get a nice Brisbane home on the outskirts of the inner suburbs for around 600-800k. Once my wife stops working, however,, and if I have issues through my employment future, we will go belly up in no time. Instead I am looking for a reasonable outer suburb home for around 350-450k, this means if we have unforeseeable issues we will be protected for some time, and we can choose to sell an IP or our home with plenty of time to spare.
It is a sad reality, but what happens if interest rates rise to 12% again like 2008, how will your cash flow be then, and what will you use to pay your rent and where will you live? I would suggest selling the house for a reasonable amount, don't try to firesale it, and get something more modest in an outer suburb with the left over cash.
Again I am sorry to hear about your predicament, I wish that would never happen to anyone, but you need to do a reality check on your finances and what you can really afford, versus what you think you can afford.