Hi,
I currently own a home worth about $300k, which has a remaining mortgage of $150k. Repayments on 5.2%pa are only $1,080 (approx) per month.
I am looking to upgrade to a bigger house, and have pre-approval from the CBA for 360k. Unfortunately I only have limited borrowing capacity due to having 4 dependents being wife and 3 kids, and a current wage of only $65k pa.
What would the financially smarter option be – sell my current home and make an approximate $100-150k profit (thus reducing the second mortgage on the new house), or rent out my current home (rent $300-$320pw) which would more than cover monthly repayments on the remaining mortgage of $150k. Cutting it down to interest-only would reduce expenses even more.
Unfortunately I am a bit of a noob at all this, and have no previous experience in investing or renting or anything like that. I will be seeking financial advice from a professional before making a decision.
I thought I'd throw the question out there to hear what others more experienced and knowledgeable than me have to say.
I will advise you to rent your house and pay the mortgage. It is quite hard, but in a long term view it s is the best idea i can give you. You can have your dream home and at the same time you don't have to sell your current home for such small price. You can't predict what will the price of your property in future. You better get a hold on it.
Hi n00b1
Firstly welcome to the forum and i hope you enjoy your time with us.
Certainly renting out the home is one option but of course will mean you will be increasing your non deductible debt and only be able to claim the interest on your current PPOR (Future IP) at the current level of $150K so not ideal.
Not sure which state the property is in but might be worth considering transferring the property into either your name if it is likely to be negatively geared or your wives name if it is positively geared.
Have to say CBA do not have the best serviceability model so probably could do better.
Either way make sure you don't cross collateralise your securities as it will limit you in the future.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Is the $360k lend enough to buy the new house(assuming you pull the deposit from the current house)?
As you said, the rent will more than cover the interest (even including the money pulled out for the deposit.
So can you afford interest on $360K?
If you see house prices going up in your area, of course it will be advantageous to have 2 properties.
You need to work the numbers to work out what will be the better option in your situation.
n00b1 wrote:I am looking to upgrade to a bigger house, and have pre-approval from the CBA for 360k. Unfortunately I only have limited borrowing capacity due to having 4 dependents being wife and 3 kids, and a current wage of only $65k pa.
Hi n00b
Welcome aboard.
Your borrowing capacity with other lenders will be higher than what it is with CBA.
As Richard said – their method of calculating max borrowing isn't very generous.
Having said that – you should base your max borrowing on what you feel comfortable paying each month. Assess your own household budget and work out how much you'd be willing to spend on your next home loan each month. From there, you'll be able to work out the max you should borrow.
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]
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