hi guys, i’m a newbie although i have been following this forum for some time but never have the encouragement to post anything. But now it is the time to get some help! My dilema is should we stay in the house we have for 4 years or downsize to a smallier house which we don’t need to get the mortgage and have some cash on hand for investment. Before you can give me your valuable advices i’d to provide you some background of our current situation:
1)Our present house is valued at $540,000-560,000 which we pay $670/m for $115,000 mortgage and we estimate to pay off the loan in 5 years.
2)This is lovely house which we have partially renovated with landscape garden just done few months ago, it is also situated in a good suburb (eastern Melb)which i think the value of the house will be still going up after few years.
3) However, with only my husband, me and 3 dogs this is house is far too big for us (4b+1study+2living+2dining+3bathrooms)and we thougt about downsizing to a smallier house.
3)We found a nice place next to our suburb with 3k more travelling to city and as the freeway is going through in the next 2 years we assume the house value in this area will go up as well. We want to offer the vendor $325,000 for it. So by the end we will pay off the house and leave some cash to do various investment.
4)Another thing to consider is i am going to quit my job so i can focus on investing. Our finance is on good shape w/no other debts and about 20k in the bank. My husband’s gross income is about $90K/year.
My question is is it worthwhile to go through all the trouble moving house or is it better to hold on to the house we have for 5 more years and try to use our saving to do the investing?I know it is long post[blush2] but can anyone out there provide us some different advices before we make the offer on this weekend? Please help![blink]
Hi Want2brich,
Given you are already finding the place too big I would consider selling up and using the profits to pay out the mortgage and buy the house you have seen in the area.
I suggest such a course of action as your existing property (and the new one too)is capital gains tax free and you’ll end up with no non-deductible debt.
Based on the figures provided you’ll end up with ~$110K cash in bank (less stamp duty and buying and selling costs)
Thereafter I would create a line of credit/equity loan against your new house of approximately $260K and use this to leverage into other property, drawing deposits and purchasing costs from your equity loan.
This $260K could be added to your $110K to create $370K to do the same thing as outlined in the paragraph above.
Another option would be to keep some of the $110K in an offset or redraw account to reduce interest while at the same time being a position to access the funds with a minimum of fuss if the world goes pear shaped.
At the end of the day the best course of action will be dependent upon your risk tolerance, ongoing employment prospects, age, health, investment beliefs and strategies, income levels , years to retirement and also your capcity to service loans.
My thoughts only.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Thanks Derek[biggrin]your advice is much appreciated. But can you explain to me if we stay in the same house and refinance to get the line of credit/equity loan against our existing house, will we be in the better position considering our current place is much bigger and in the better location? cheers
whoa, lets not get too crazy. 115k mortgage would be nothing if you sold you house and moved to a smaller property. As it is your PPOR at the moment there is no cap gains tax to pay so selling is for you a good option. OK so you have your new house wherever and it is worth say 350k. Not only do you still have about 75k cash to play with but also 280k in equity to use for intesments in your new house. So totally 355k as deposits. Hmmmmm, a juicy little $1,775,000 in possible invvestments NOW!
As the loan on your house is solely for deposits you can get it interest only, your salaries plus the surplus seviceability from IO then gives you oodles of yesses from banks and other lenders.
Then you see me and I find the properties.
Nothing could be simpler.
DD[biggrin]
Don’t sweat the small stuff,and it’s all small stuff!!
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