Hi
I need help!! I am a single mum with 3 kids with a large mortgage (which I got in our divorce settlement) and only working casually, but permanent hours. I am so keen to do something to start getting on track to help my children and I long term, to start finding financial stability. I have never been good with money thus far but am trying to learn. [
]I have read Steve’s book and also a couple of Robert Kiyosaki’s books and am so interested in getting on the right track.
But my situation is not that good. My house has been valued at $420,000 by the real estate and my mortgage of $197.800 is a lo doc loan with Adelaide Bank at 7.82%..not cheap I know…repayments of $350 week. So I have some collateral in my home…but my problem is I have $10,000 worth of debt which includes 2 credit cards and a store card…I am just keeping up with the minimum payments which will never get me anywhere, yet I can never see myself paying them off as it would take far too long.
I also don’t want to sell my house.
Does anyone have any suggestions for me. I so much want to get rid of them totally and never have credit cards again as I know I am not good with them. So, I wonder, can I somehow incorporate these debts into my existing lo doc loan to get rid of them? and then what would my chances be of obtaining finance to get an investment property?
Any advice at this stage would be so much appreciated.
Please…..[:X]
Hi Mustang66
You could try talking to your lender about incorporating those other debts into your homeloan. You could also talk to a mortgage broker and see what other options you have available for finance.
Personally, I’d sell the house (that’s over $200,000 you’d realise), pay off the debts, rent a nice house (for less than $350/week), and put large deposits on a few investment properties. That way, they’d be cash flow +ve so you wouldn’t have to worry about servicing them from your wage. You’d also be in a better position tax wise.
I know you don’t want to sell the house so maybe someone else can suggest a way that you can have the cake and eat it too.
Regards
JudiHi Judi
Thanks so much for your advice…as much as I don’t want to sell my house, it might be the only way to go.
If it means possibly getting some investment properties, that is what I want, but my problem will then be, who will borrow to me to get investment properties on my current earnings.
Will talk to a mortgage broker for ideas…but thankyou so much for your advice.
G`day Mustang,you have very healthy equity of over 200k in your home.The crux of the matter is affordability.When you go to your bank and say I want to invest in real estate they will look at your situation and say ok,what is your income, what are your expenses. They will take into account the new place will provide income{rent},but they will be very conservative and only allow a % of this figure in their calculations.
If you haven`t already, I`d suggest you arm yourself with all your financial details,recent pay slips,bank statements,credit card details etc.,and visit your bank manager and tell him {or her!!} what you would like to do.Tell him you would focus on +`ve cashflow property to keep out of pocket expenses to a minimum.As a first step this will let you know where you stand.Then do the same thing with 3 or 4 other banks or mortgage brokers!!! Shop around.
The great thing about real estate is the banks love it!!{because they can flog it off to get their money back if you stop paying up}All this will cost you is a couple of days of your time and will be an education in itself.If the numbers add up,I`m sure they would consolidate your credit card debt into any new loan.
Hope this helps, and good luck in your journey.Regards Terry
Hi Mustang
I don’t expect that will be a problem. With a 35% deposit, I think you can get a loan with no questions asked. There are some very flexible lenders around.
Good luck
JudiMustang66
Speak with one of the mortgage brokers on this forum regarding your options and your ability to incorporate, plus costings involved etc…
You could always sell, but that’s only 1 option, you could also turn your PPOR into an IP and rents something nice and a bit more manageable yourself, and still use your equity to finance investing..
As stated before, talk to one of the brokers here for advice, they’re investors as well..[^]
At the end of the day,look at all options, but do what fit’s your ‘comfort zone’..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Mustang,
I would NOT sell your home if I were you. It sounds like you live in a nice home, and you have kids- renting would cost you as much as your mortgage probably.
I would chuck the credit card debt into your current mortgage, perhaps think of moving your loan to a cheaper rate (but there will be costs involved in doing so, as you know) and thinking about how you can use the equity in your home to buy some CF+ props, if that’s what you want to do.
Paying rent or a mortgage will limit what you can do on a part-time income. You have a lot of equity- so that will give you some choices, but remember- a finance institution is concerned about serviceability- not on how much equity you have. An example of this would be a pensioner living in a million-dollar home in sydney- lots of equity- but no way to pay off future IP’s- unless of course they sold their home- a rather large sacrifice.
Can you work more hours at your current job?
kay henry
Thankyou to everyone for your suggestions and words of advice.
Thankyou Kay, I don’t particularly want to sell the family home as through the separation, I think it is the one thing the children had, their family home.
However, if I have to I will.Rent in the area will cost me nearly as much as my mortgage, except that I would get some rent assistance.
I am unable to get more hours with my present employer (Education Dept) – budget cuts – and was thinking of starting my own at home office work or book work business, but that won’t make me much extra. Then I tossed up the idea of my own business, which I have always wanted to do, but in what field not sure…
I see what you mean about the banks viewing the “serviceability” of any future loans for IP’s, is that the same for lo doc loans. My current loan on my PPOR is a lo doc loan as that was the only way I could get finance after our separation, I beleive the mortgage broker “helped” out my figures a little on that one.
Thanks for the advice, any more is very welcome
“I would NOT sell your home if I were you. It sounds like you live in a nice home, and you have kids- renting would cost you as much as your mortgage probably.
I would chuck the credit card debt into your current mortgage, perhaps think of moving your loan to a cheaper rate (but there will be costs involved in doing so, as you know) and thinking about how you can use the equity in your home to buy some CF+ props, if that’s what you want to do.
Paying rent or a mortgage will limit what you can do on a part-time income. You have a lot of equity- so that will give you some choices, but remember- a finance institution is concerned about serviceability- not on how much equity you have. An example of this would be a pensioner living in a million-dollar home in sydney- lots of equity- but no way to pay off future IP’s- unless of course they sold their home- a rather large sacrifice.
Can you work more hours at your current job?
kay henry”
Hi Mustang
I agree in principle with Kay and Redwing, but, for your situation??
It depends on what level of financial committment you are comfortable with.
Where would you stand financially if you were to sell and realise the $200,000, buy 3 IP’s for around $180,000 each with 35% deposit (cash +ve and not necessarily near where you live) and rent a place for around $250 – 300/wk. And, as you mentioned you might get rent assisstance.
Even buy 1 or 2 more expensive IP’s (I just think it’s nice to have back up if you have one IP vacant for any length of time).
Just depends on your tolerance to risk and your short as well as long term goals.
Kind regards
JudiHi Mustang
Just a word of caution regarding the Lo doc Loans. Heard thru the grapevine that the ATO is looking very closely into applicants on Lo Doc Loans and verifying the info against your tax returns. Could be a few people come unstuck this year.
Have a chat to one of the brokers/originators on this forum about trying to get Full doc status. What if you rented out your place to increase your serviciblity to get onto a Full Doc loan at a lower rate and consolidate your bad debts at the same time? As long as you can get onto permanent part-time?
You gotta get rid of those bad debts as they will swallow you up in no time.
With regard to the valuation, I wouldn’t count on the banks valuing it anywhere near the agents appraisal so factor that into your calculations.
Good Luck!
regards
Brendon
Acute Mortgage Reductions
‘Better Finance for More Homes Sooner’Hi Brendan
Thankyou for your advice…but can you tell me the difference between a lo doc loan and a full doc loan?
Thanks
Originally posted by mustang66:Hi Brendan
Thankyou for your advice…but can you tell me the difference between a lo doc loan and a full doc loan?
Thanks
Hi Mustang66
The difference is a few bits of paper and maybe a couple of percentage points in interest. Lo doc means “low documentation” ie, you don’t have to show payslips or other proof of employment or income. Full doc is a regular loan. Low doc is designed for self employed people and others who may not be able to prove their income via the usual channels.
Kind regards
JudiHi
Then there is also a NO DOC loan(at lower LVR’s). Essentially you do not have to prove your income so to speak and sign a stat dec declaring that you can afford the loan.
The problems will arise where borrowers have ‘fluffed up’ their earnings to get the loan but on their tax returns they are showing minimal earnings.
Brendon
Thankyou so much for all the advice I have received…
As a very newcomer to the whole idea of investing in an IP and wanting it so badly and wanting to make that first move, it is very daunting knowing which way to go…and making any move seems to be the hardest for me…fear I think [
]Rent in our area will cost me as much as my mortgage does a week now..[
]What other advantages would I have in renting out my PPOR? I would prefer not to sell my home as the children are so settled here…but would that seem the best option for me? or can I use the equity in my home.
Thanks guys…
You all deserve so much thanks for being willing to give your time and advice and help so many on here with you advice and knowledge.[:X]
Mustang
All comes back to cashflow and servicibility. Sure you can refinance or ask your current lender for a line increase, in order to access the equity, but can you service any more loans?
If you can find +cashflow properties then sure you can do it.
I would first concentrate on getting rid of your bad debts first before looking at taking out anymore property loans, as that will ease your cashflow, and if you get rid of the c/cards your servicibility will increase too.
Good luck
Brendon
Acute Mortgage Reductions
‘Better Finance for More Homes Sooner’Brendon, can you please explain how the ATO are going to access your bank application forms to see what you declared your income as?
And how that’s going to make any difference to them at all? Sure, say I tell the bank I earn $100K per year so they will give me the Lo Doc loan, when in fact I only earn $50K but know I can afford to pay it off.
Why’s the ATO going to care? And more to the point, what can they do about it? I thought the whole point was that your income wasn’t easy to prove (self employed etc. etc) which is why you have gone Lo Doc in the first place.
Cheers
MelSorry Mustang, forgot to answer your question.
I would suggest you talk to a mortgage broker – about your existing loan, and what possibilities you have for future. If you can hold onto your home and borrow against it to buy CF+ properties, then that would be good for all of you. Kids keep the house, and you have extra money coming in.
I would use this money (and other savings you can) to pay off all your credit card debt, (then cut them up, but keep one in a drawer for emergencies ONLY) and then pay that money towards your home mortgage.
Cheers
MelHi Mel
Perhaps I should of clarified that this was information passed onto me from Brisbane Solicitor. According to him, it has started already.
If your income declared on your stat dec far exceeds your figures on your tax returns, either you’ve committed mortgage fraud by lying on the stat dec, or you are not declaring all your income and should be paying more tax.
I would imagine if the ATO wanted to see the bank application forms then the banks would be forced to hand them over.
Can any solicitors confirm this?
Brendon
Acute Mortgage Reductions
‘Better Finance for More Homes Sooner’What is your income? Where is your house?
Hi Jacob
Why do you need to know where my house is and my income? Just interested.
Thnaks
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