Hi Everyone
I am totally confused on which way I should go. I am about to consolidate some debts with my mortgage, the bank have just done a valuation on my property and I will be borrowing up to the full 80% to cover all debts (minus a few thousand, which i can handle)
The thing is, I am interested in purchasing an investment unit, but as I don't have the cash for the deposit, I am not in the position to do this at the moment.
The choices I do have are:
1/ hold off and save the deposit (but it bothers me that i may be missing out on the market)
2/ I could extend my current home loan above the 80% which will give me enough for a deposit for my first unit, but this will cost me around $2000 in mortgage insurance on my home loan, then will also cost me another $2000 on the investment unit loan for mortgage insurance as the loan will be for 90%. Is this way viable, having to spend the extra $4000 on the insurances, or am i able to claim both of these at tax time? Will be positive geared unit, bringing in around $50-$60 per week income after expenses.
3/ I have also thought of selling my home. I have been advised by both my accountant and other helpful people, that now is not the best time to sell (which i do realise this- and have been advised a better alternative is to rent out my home). But my trail of thinking was, if i sold my house, i could pay all my debts out and the money left over would leave enough to purchase maybe three of the units i have found. These units will bring in around $160 per week (maybe a little more) in income combined after all expenses.
I am tired of sitting on the sidelines, and don't want to miss out on todays interest rates and the properties that are available.
Any input is greatly appreciated.
T.Not an easy question to answer. No one knows what to do, and the one that think they know and say so are only seeking reinforcement for their actions in the assent from others.
If you sell now, and the First Home Grant is not extended past July, and the banks start cutting lending down to 90 or 80% prices will go down further and you sold at the best possible price…that if your property is worth less than $500k
If the fhog is extended and the share market keeps on going up as it has lately, banks may stay put with 95% lending and you may get a better price later in the year or next year.
As for buying 2008 was the best year ever. If you want to buy now, there is plenty on offer but also plenty of competition from new buyers with Robin Hood's money..
And there are a lot of other possible scenarios like wait and see if lower prices will come reading eagerly the newspaper for bad news scanning for words like "crash", "disaster", "depression" etc. And if you are a professor of economy and sold your house last year on the gamble that prices will go south, have as much possible exposure to media and sell your doom and gloom for a price in order to discourage more people out of the market and create if possible an even worst scenario than the one described by our pathetic yet fearless "leaders" with photo opportunity in sleeve-up and tie less somber faced fashion.However as a general rule I would say that if your work mates in the office say it is time to buy…then you sell. If they say what a disaster must sell…then you buy
Don't ask for RE advise to your accountant, financial "adviser" and don't ask your friends and relatives unless they are investors with at least 10 properties and 10 years of experience. Make that 20 properties and 20 years of experience
As for borrowing get a mortgage broker to look into borrowing choices and repayment capacity, the fact that you borrowed to clear debts tells me you may be close to the limit in your repayments(?)
Remember investing is good but has a risk component. In your case that risk component is the one that you must consider carefully. Underestimating risk is what brings most investors down.Marc
Thank you for such an indepth reply. Certainly was interesting to read and helped me to understand the way the market works.
T.
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