Options?????

First thing I would do is confirm that your loan on the PPOR has a 100% offset account. Then I would figure on an amount that I felt good about having as a reserve buffer in case of emergencies. For instance I like the idea of paying the car off asap, but if that left you with $5k savings and your budget is $7k p/m, then you have less than a months savings in reserve. Is that enough to sleep comfortably at night?

Then I'd save enough to pay the car off (if needed, maybe just one or two more months at your rate of savings) and pay it off completely. Bare in mind, not only does that take the liability off your books, but it also frees up the monthly payments in your budget.

At the same time, I'd be investigating why you're paying so much interest on your loan. Was it low-doc? Experts here might be able to give you more advice, but as an employee I can't see why you're paying more than low 7%s.

Then it comes down a lot to your lifestyle choices. If you sell for $420k, you'll have to pay agents fees/advertising/legals/etc. you may not walk away with any cash at all, but you will retire the debt. Are you allowing any emotion in your decisions, or is it purely from a financial point of view?

Does improve your position ASAP mean, improve your cashflow position today, or start preparing for the future?

Hi Brandira,

You're situation looks pretty good to me.  Since the house is your home and not an investment property, do not stress too much about the capital gain.  If you like living there, then that is the main point of owning the house.  How long have you owned it for?

I would not spend the savings on paying off the car loan in one lump sum, because it is good to have that $20k there for emergencies.  However, now that you have that buffer in place, stop saving more and put all extra income into paying off the car loan.  Alternatively you could dig in to your savings a bit (say $5k) and put that on the car loan and then pay the rest of ASAP.

Personal debt (such as car loans and credit cards) will always work against you when it comes time to buying an investment property.  If you are going to buy an investment property soon (eg. for $350k) you will probably need a 10% deposit, plus stamp duty of approximately $10k to $15k depending on the state which means you'll need to save another $50k.

If you want to get into an investment property sooner, maybe start looking for cheaper properties around $200k to $250k.

If you are planning to use equity in your home to purchase an IP you may need to wait another couple of years for it to appreciate (assuming there is potential for growth in the short term).

Cheers,

Darren.

Time constraints restrict me from a full response but can i ask you are you really paying 8.3% on a home loan?

First thing i would be doing is negotiating the interest rate with your current lender.

Cheers

Yours in Finance

Pay off the car loan ASAP (monthly) and save yourself the additional 5+% interest payments.
Put the $20K into an offset account with your home loan to get a tax free benefit at the rate of your house loan.
See if you can add value over the next 6 months to the house (repaint, pation, etc).
Have it revalued in 6 months after all the renos done.
Save like hell in the same 6 months.
Use the 6 months to find IP in the area of $200-250K; something that needs reno so you can add value.  Make sure the new IP is valued as at AFTER the reno has been completed; its on this figure that the bank will 'usually' loan 80% (without mortgage insurance) against.  THis way, the bank is effectively financing the reno as well.
Dont stress it, you seem to be doing fine….your monthly income is far lager than most.