Hi all,
Could anyone please offer some advice to our dilemma as we have no idea what to do.
Here is our current situation:
• PPoR in Sydney
• $425k mortgage (interest only)
• $136k investment loan (interest only)
• One offset account in place already for both loans
• Property is worth $800k
• Current rental appraisal would give us $800/week
• $17k credit card debt
• 2 car loans
• Husband had unexpected brain surgery this year which used up all our savings
• Now living week to week with no savings and desperately trying to get ahead
• 3 young kids (under 6)
• Me (wife) only working part-time
Thankfully, hubby is now OK and has landed a residential job in the mines in WA. So he will now be earning $130k pa.
We have a 5 year plan to stay in the mines at WA, where his company has given us a house and we pay $150/wk rent.
We want to keep our current house in Sydney and rent it out while we’re away. The rent should cover all (or most) of our Interest Only Repayments.
We want to return to Sydney after 5 years but wont return to our current house as we plan on getting back to the Northern Beaches.
So, my question is do we change our current loan from IO to P&I to get our mortgage down?
We would also like to purchase our first IP within the next 12 months.
I guess from a financial perspective we’re really not sure what we should do but our goal is to start an investment portfolio and purchase a new property every 12 months.
If you were in our situation, what would you do??
Any help / advice would be much appreciated.
Thankyou
Hi Boshie,
3 reasons why I would go onto an IO loan based on the situation above.
1. It makes more sense to keep the loans on IO until cashflow picks up.
2. If your strategy is buy a house every 12 months and you have no savings today – it again may be another reason to have an IO loan so that you can park and accumulate a healthy deposit for the next purchase. You also seem to have a bit of equity in the PPOR which will help too.
3. You have 'bad debt' being the credit cards and the car loans. You are paying a premium on the interest and they are not tax deductible. Going on an IO loan will mean you can afford to potentially send the spare funds to these loans instead of principle repayments back into the loan.
P.S – Husband sounds like a trooper to have a brain surgery and then head to the mines! Good on him.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Definitely stay on interest only home loans.
You want to pay down the bad debt asap clear the credit cards and car loans first as they’re not tax deductible (Home interest is deductible when ppor becomes iP).
When you buy ip purchase in husbands name if going to be negatively geared as he is on higher income.
Ideally lose the car loans and buy cheaper vehicles in WA so you’re not paying so much for them and your bills are lower.
Loan repayments should be around 650pw look at refinancing if you’re paying much more than that.
Get a depreciation report for ppor when it becomes ip.
Hi Boshie
Keep them as interest only for now – it will improve your immediate cashflow and you can focus on paying out those non-deductible debts first.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
My feeling is it depends on how much you want to get ahead. You basically have two choices stay where you are until your position improves or secondly sell your house rent and reinvest the money that you have in either a development project or buy a property in a high growth area.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
Hi Gazza21
Thanks for your reply…. much appreciated…
I'm getting the idea its best to stay on Interest Only whilst we're away and renting it out. You mentioned obtaining a Depreciation Report when we switch it over to an IP – who does these? And what is the reason for having one?
Thanks again
Boshie
Thanks Shahin and Jamie for your replies. I appreciate your time.
Nigel,
We did think about selling the property however our chances of getting another loan right now are not great. We figure it is best to keep what we have in Sydney, get hubby in a stable working position, then in 6 months time we would look much more favourable to the banks.
Hi Boshie
You can get a quote for a depreciation schedule at washington brown's website. They are national and one of the biggest in the quantity surveying industry.
Washington Brown – http://www.washingtonbrown.com.au
regards
Michael
More discussed about depreciation schedules here
https://www.propertyinvesting.com/forums/help-needed/4346276
ATO give property a lifespan of 40yrs (i think) and varying spans for other fixtures & fittings so you can claim depreciation annually and save far more than what the schedule will cost you
Hi Boshie, as you’ll be moving too, will you be getting a job as well or staying at home? What is the situation with childcare should you return to work? Can you get a p/t job over there?
Can you then direct all these funds to paying off your credit cards & other loans?
You must be logged in to reply to this topic. If you don't have an account, you can register here.
