My partner and I are in a long term de facto relationship We have 2 properties , both in a popular SA sea side town .The first property has a $70,000 home mortgage loan on it . It has a value of somewhere between $350,000 and $500,000. This property is tenanted. It does not provide us with any tax advantages.This property is in my name.The second property has a mortgage loan of $160,000 on it .This is our principal place of residence. We are told it now has a value of between $300,000 and $400,000. This property is in my partner’s name.We would like to free up some cash to take a trip around Australia. We received financial advice recommending selling our non residencial property paying out all mortgages putting aside money for a trip and placing the balance in managed funds topping up with the saved morgage funds.We haved received other advice recommending not selling these valuable properties but extending out our residential $160,000 loan from 25 to 30 years at the same repayments and raise an extra $26,000 for our trip. What is the best plan of attack.
You have a complex situation because each property is owned separately, there could be cgt implications etc etc
Selling up a property where there may be cgt and where there will be selling costs eg agents does not necessarily make much sense if all you want to do is free up $26,000. However, if you top up and extend your mortgage the extra 5 years your total additional payments could be over $70,000.00.
If you increased your mortgage payments when you got back so that you paid the $26000 off quicker that might make better sense. Maybe you could do this by making the mortgage on your place Interest Only if it is not already IO.
If you sell, in addition to the costs, you will lose any future capital growth.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
speaking as a novice, I sold my first ppty to buy a buisness when advised not to. I now realise i would have been much better off keeping my house.
I think you would be bloody mad to sell that ppty all for the sake of $26,000. The sale it self has the potential to put stress on the holliday!?
Dave
I did the same thing!
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
If you sell an asset or save for the holiday, it will be your own money you are spending. If you ‘withdraw equity’ by extending one of your mortgages, you are simply using your perception of increased wealth to secure a larger mortgage. I remember the good old days when one of the main financial strategies involved decreasing your mortgage over time rather than increasing it…
But I seem to be in the minority on this topic, so knock yourself out.I would hold on to the property while you take your holiday![biggrin]
Thanks for all of the ideas on this topic. Yes the idea of getting deeper in to debt is a worry,and holding on to property for growth has great logic. Why are there so many houses on the market??
Maybe the idea is to sell now at the top of the housing cycle and use the already gained capital growth [ ABOUT $330,000]to have the holiday and look for great position land somewhere on the Australian coast line ,with a view to building a retirement dwelling later and our present residential home becomes an investment property as well.Surely converting a property into useable funds is acceptable if you are astute about what you do with the money.
SUPPLEMENTRY IDEA : HOW COME WE DON’T HERE A LOT ABOUT THE BENEFITS OF OWNER BUILT HOMES PLAYING A PART IN WEALTH CREATION.Cheers all ………………Tonto
Originally posted by Tonto:Why are there so many houses on the market??
I think that was a rhetorical question? A) Because there are very few people buying and very many speculators trying to bail out/ cut their losses.
Maybe the idea is to sell now at the top of the housing cycle and use the already gained capital growth [ ABOUT $330,000]to have the holiday and look for great position land somewhere on the Australian coast line ,with a view to building a retirement dwelling later and our present residential home becomes an investment property as well.Surely converting a property into useable funds is acceptable if you are astute about what you do with the money.[thumbsup2]
I’d say it’s more than acceptable, I’d call it… savvy! Just remember that we have passed the peak of the market and if you are really serious about selling one house, buyers do actually set the CMV, not sellers. Don’t fall for the old trap of chasing the market down. It’s better to accept 10k off now than 50k off in 6 months.
I also share your dream of retiring with ocean views… matter of fact, I’ve got them now!SUPPLEMENTRY IDEA : HOW COME WE DON’T HERE A LOT ABOUT THE BENEFITS OF OWNER BUILT HOMES PLAYING A PART IN WEALTH CREATION.A couple of reasons; because it’s a tough slog, and because there are restrictions on resale of owner built houses. Finance is also difficult unless you can set up a line of credit using an existing security. If you can overcome these obstacles, you should do very well given that most builders in my area are currently quoting about 75% labour and 25% materials for construction of new dwellings![stun]
Good luck with whatever you decide.
F.
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