All Topics / Finance / Less Income – But Still Able to Invest?

Viewing 6 posts - 1 through 6 (of 6 total)
  • Profile photo of HumpzHumpz
    Member
    @humpz
    Join Date: 2009
    Post Count: 8
    January 31, 2011 - 6:27 pm

    Hi Guys,

    I am looking for some advice if possible, my situation is fast approaching my limited knowledge.

    In a nutshell;

    We purchased our PPOR last year @ $330,000 with $250,000 owing.

    By 2012 we will have a new bub, about $60,000 in our offset account and I guess a little bit more paid down on the principle.

    I plan to burn off my long service leave and become a bit of a stay at home dad for awhile whilst finishing my degree. So our income will basically halve – enough to service the loan repayments, and a couple of hundred bucks per fortnight will trickle out of that offset account to keep our heads above water whilst this lifestyle change is in effect.

    I will have some sporatic reserve work with defence, but nothing really worth relying on or equating into the situation.

    Given our position and my original intention of purchasing an investment property – is it doable? If so, how? If not, why not?

    I have no in-depth knowledge of interest only loans, though I would expect that to be one of the options thrown out there..

    Basically I just need advice, whichever direction you think we should go.

    I don't feel that we are in a bad position financially at the moment, and this lack of income scares me – but it is neccesary in the bigger scheme of things.

    Please help me out :)

    Thanks in advance

    Damo

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    January 31, 2011 - 8:13 pm

    Hi Damo

    It sounds like a stretch. Even if there is a lender that’s willing to provide finance for an IP, if you anticipate that you’ll need to dip into your savings to fund your lifestyle (and you’re already worried about your current financial situation) than it might be best to hold off from placing yourself into further debt for the time being.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674
    January 31, 2011 - 10:23 pm

    One thing to mention.

    Once your income drops the lenders will lend a lot less or no loan at all .

     While you earn income the amount lent will be higher.

    I have been in this situation for 6 years as a stay at home dad and my borrowing capacity is a lot lower than when I worked full time.

    Profile photo of HumpzHumpz
    Member
    @humpz
    Join Date: 2009
    Post Count: 8
    February 1, 2011 - 8:42 am

    Thanks for the advice guys, I appreciate it.

    Thinking ahead some more, if I reduced the PPOR to interest only (if we needed to tighten out belts a bit), is there a capacity to do that generally? If so, can you still pay down the principle if there was extra cash laying around?

    It's comforting to know others are out there that have done the same thing duckster.

    In all honesty I am uncomfortable with leaving work – but in saying that it's much better for our long term prospects once I finish my degree, and bub will be approaching school age.. opens up a new chapter of earning and investing.

    If I didn't have the 50-60k overflow in the offset I probably wouldn't be able to pull it off.

    What are the pros and cons of the interest only approach? Being my PPOR I'm not overly concerned on gains at this time, just getting through in good shape :)

    Cheers guys!

    Damo

    Profile photo of HumpzHumpz
    Member
    @humpz
    Join Date: 2009
    Post Count: 8
    February 1, 2011 - 10:28 am

    Looks like the NAB won't let me reshuffle the loan because it's under the Defence Home Owner Assistance Scheme or whatever – becuase it makes the property 'look like an investment property' even though it's still simply a residence.

    I'll have to crunch the numbers I guess. Being under DHOAS gives me a free $400/month off the principle..

    Nothings ever easy is it.

    Profile photo of v8ghiav8ghia
    Member
    @v8ghia
    Join Date: 2005
    Post Count: 871
    February 4, 2011 - 8:50 am
    Humpz wrote:
    Looks like the NAB won't let me reshuffle the loan because it's under the Defence Home Owner Assistance Scheme or whatever – becuase it makes the property 'look like an investment property' even though it's still simply a residence.

    I'll have to crunch the numbers I guess. Being under DHOAS gives me a free $400/month off the principle..

    Nothings ever easy is it.

    Hi Humpz,

    Taking your last point first, it is actually in your case (other than your line of work of course!)
    P&I repayments VS Interest only are not that much different really, as you only pay a small amount of principle in the early years on a home loan. An you get the DHOAS subsidy, which even on the lowest tier, makes your payment much less than if you were paying an interest only loan.

    And it's not the bank – DVA require all the loans to be P&I, variable or fixed,  to qualify for the subsidy program. The NAB could swap your loan for you to I/O if you want, but then you are no longer eligible for the DHOAS subsidy. No brainer – leave it as it is and make the most of the arrangement.

    And of course, you keep getting this amount regardless of your loan balance……..

    All the best with your change to – takes guts……I know!

    Cheers

Viewing 6 posts - 1 through 6 (of 6 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.