My husband moved to another city 4 hours away for a promotion and we bought a house there in July 2007. I still live with our youngest daughter who is completing year 12 this year and I have no where for her to board so it looks like my husband and I will be apart till at least the end of 2008. My husband was receiving an allowance for him to move which runs out at the end of January which is going to make it very hard for us to pay for two mortgage payments.
I am trying to decide what is the best option.
– get someone in to board one or two of the bedrooms to help pay the mortgage
– rent out the house I am living in with my daughter and rent a unit for us to live in
– rent out the house I am living in with my daughter and buy a unit/house
– stay how we are and hope we can afford to pay the two mortgages plus all other expenses
– sell the house and rent a unit, leaving husband in house with a mortgage as principal residence and paying excess money off that loanI don't like the idea of sharing my house with other people I don't know so I have discarded that idea. I am afraid that if we buy something else and rent out the house then I won't be able to afford the mortgage payments on it as I will be in the same boat as if I stay in our house. However, when my daughter finishes school she doesn't want to move in with my husband and I and if I buy something she can stay in it and rent out a bedroom to share the costs. As we don't owe much on the house I don't really want to sell it also.
Our combined monthly net income after end January will be approx. $6300
House 1 – value approx. $380 000 – $400 000 (paid $370 000 in July 2007 and have added improvements of approx.
$10 000) – repayments approx. $2200 per month – Owe approx. $320 000
House 2 – value approx. $450 000 – repayments approx. $1450 per month – Owe approx. $215 000
Share loan – value approx. $79 000 – repayments approx. $405 per month – Owe approx. $59 000
(Plus all other costs such as rates, electricity, phone, insurances etc. for 2 houses)We have just finished painting and renovating one of the bathrooms and am getting new carpets in the bedrooms at end of January, I will then get house revalued so we can access the equity, and see if valuation comes in close to my estimation. I have looked at other properties and think we should be able to get at least $400 – $420 per week rent if we rent the house out. If we can get this rent it should nearly cover all costs for mortgage, rates etc.
I was wanting to get others advice on what they think my best option may be as I don't like to stretch us too much financially until I am living with my husband again and only paying for one household. However I have never paid rent in my life and think it is just dead money paying off someone else's loan.
Sounds like you are the one carrying the bundle. I don't want ot offend anyone but it seems that there are too many homes and too few living in them. What about if your husband moves into a 1 bedroom unit or a share accommodation unit so that the house he is in can be rented out. I know this might alter your stamp duty concession but could be the cheaper alternative. You didnt mention how much that house would rent for (I think you were referring to yours) or what area it is in. Your combined loan repayments are already nearly 3/4 of your income and interest rates are about to increase again. I would think twice about accessing any more of your equity funds and maybe sell the shares. Hope this helps.
Jennifer
mackayite wrote:Sounds like you are the one carrying the bundle. I don't want ot offend anyone but it seems that there are too many homes and too few living in them. What about if your husband moves into a 1 bedroom unit or a share accommodation unit so that the house he is in can be rented out. I know this might alter your stamp duty concession but could be the cheaper alternative. You didnt mention how much that house would rent for (I think you were referring to yours) or what area it is in. Your combined loan repayments are already nearly 3/4 of your income and interest rates are about to increase again. I would think twice about accessing any more of your equity funds and maybe sell the shares. Hope this helps.
Jennifer
My husband was renting, but because of the increase in house prices in Cairns we decided to buy while we could still afford it at the time instead of waiting until I moved there. We did contemplate renting out the house however it would have cost us around $10 000 in stamp duty which would have been more than the allowance my husband was being paid by his employer. When waying up the options it was better to have it as a principal place of residence. Our other house is in Townsville where prices are on the up and up for anything decent. It has only been through my sister reneging on my daughter boarding with her due to her moving in with her boyfriend into a small house has prompted some decision making about our predicament.
If its all east coast property you could roll both into a 'Cash Flow Manager' loan essentially almost halving the repayments required, the other part of the loan is capitalised which you may choose to do until you and hubby are back together?
Email for the spreadsheet and info to see how it works if you want.
The Cash Flow Manager Loan
Where you are at 80% lend but would like access to 10% of your equity to help manage cash flow then this is a lending solution.
Simply speaking, the Cash Flow Manager Loan capitalises a portion of your interest payment onto the loan itself above the 80% level and continues to do this over 5 years. The interest rates are a little higher, however, you are freeing up cash flow in exchange for this. It takes pressure off the budget as you hold your property portfolio and watch it grow. There is a risk fee applied up front (similar to a mortgage insurance fee) which can be added to the loan as well, however, this is in essence little different to the mortgage insurance fee that would apply normally.
Here's an example of how the loan works. Interest on the Low Docs Cash Flow Manager is currently 8.45%, however:
In Year 1 – pay 4.20% and add the remaining 4.25% to the loan balance.
LVR is now 83.2%
In Year 2 – pay 5.45% and add the remaining 3.00% to the loan balance.
LVR is now 85.8%
And so on up to 90% LVRYou can roll this loan capitalising pattern back to the starting point once in the five year cycle thus extending the time that the strategy will give a positive cash flow.
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