Hi everyone,
I'm sooooo frustrated. I need your views, male or female about what you think of my current predicament. My hubby bought his first house off his uncle for $350K. They had a deal where his uncle lent him an additional $150K interest free for the first 3 yrs so hubby could qualify for the initial loan. This was because my hubby had racked up a LOT of debt which had been spent on things like cars and holidays etc (assets that DON'T appreciate in value).
The bank lent my hubby $288K at the outset, hubby has kept up with payments no problem (mind you the loan is fixed at 6.99% until mid 2009, so he HAS NOT experienced the higher interest rates we are currently seeing), the loan is now currently at $280K. The problem is now that hubby needs to pay his uncle the further $150K, the bank will not lend to him without me as guarantor for 1 yr. My problem is that I feel that he should be selling his house to become debt free, as he is lucky that the value would appear to be somewhere in the vicinity of $450K.
He is arguing that I am being selfish, whereas I see it as merely avoiding the potential domino effect – I own my own home with a smallish partial mortgage, and have 1 IP. If he took out the further $150K, his borrowings would be total $430K: on his wage of $60K and tenant paying $250 per week, I don't like the sums. He has no other assets, but has credit card and tax debts of $20K. I think it looks really bad in that he has borrowed to the hilt in my opinion. The property badly needs renovation work but is on a large block with incredible views. Do I do this out of 'love' and live in fear for 12 months or feel guilty that I refuse to sign on the dotted line??
Please help!
LisaAre you able to subdivide the large block and sell the section to reduce debts and give him a deposit? If the figures are $250 per week rent there is no way that 450k should be tied up in it.
Hi mattnz
He cannot subdivide due to council restriction. He is thinking of renting each room out to increase cash flow to $400pw as there are 4 bdrooms though.
To my mind he is taking on too have a debt burden with too little cash flow! !Thanks for your comments
LisaWell if he's your husband you're in deep trouble. If he can't pay , they will have YOU pay for him, it's really as easy as that, no questions asked. If he gets in debt, there will be no questions asked to you, you will be foreclosed together with him. The joys of marriage.
He sounds like an irresponsible money-spender, the type that's usually female. A personal tip : if he's on drugs or alcohol, ask for a divorce now that you still can. Back to the housing issue : Judging from his comment about being selfish, he most probably will take you down with him. Beware of people telling others that they are selfish , usually they tell this because they themselves are selfish.
I presume his uncle made up a contract about those 150K , and NEVER.. EVER … EVER… NEVER !!.. get financial business in the family. It *WILL* lead to a breakup of the family. That's another tip.Anyway, that's too late now.. he will need to cough up enough money to pay off his house. There's a reason why the bank didn't lend him all the money, it's called "risk factor". If the bank doesn't trust your hubby with that much money, then you SURELY should not, because banks usually look on the bright side of things, and usually are wrong( they lend too much ). So yes, you're in trouble.
Sell the house if you still can, put it on the market for 390K instead of 450K , so it sells quick and gets your hub out of debt.
In 1 year from now, you don't want to be reading this if you haven't sold.
Houseprices will not go up, more and more people have the problem your hubby has : fixed rents going up from 6% to 10% late this year or early next year. This will cause a flood of foreclosures, people in the same situation as you are in.
NEVER .. ever put yourself in this position.
Not making profits is less bad than making lifechanging losses : Sell the house for 390K, take the WINNINGS !!.. ( you earned 40K on it, be happy with it ) and don't go for 450K just because you think you can take more winnings : you won't.
Get out of trouble before you're in too deep : Now the choice is still yours, soon it will be the banks choice, and believe me : they won't be as nice as I am to you.
Show him this post , show him reality, tell him to take his profits and get out of the housing business until the crash is passed, then get back in for a cheaper house.
Oops.. didn't read this part : He has no other assets, but has credit card and tax debts of $20K
Omg… tax debts ? Credit card is bad, but tax debts are as bad a hitting a police officer, it will get you in trouble fast and it only gets worse : you get on the taxpayer blacklist. There's no reason he should have a tax debt, if he owns a car and boat and stuff, SELL IT. If he needs it for his job, buy him a second hand car, or a bike.
Oh you're in so deep that you will be lucky to get out of it at all. Why do partners get themselves into so much trouble ? I'm sure he did it out of love for you.You obviously aren't compatible with him. If you can't agree with him on a financial side, break up. I had the same with my ex, and my new girlfriend had the same with her ex… it's a terrible , terrible situation to be in , people spending YOUR money from YOUR investments on silly things like cars and luxury items.
They are living on your investments, leeching on you. My guess is , you haven't been married to him for long, because if you were you'd already have divorced him. Sorry for my utterly direct posts, hate me if you want, but please just take my advice and save yourself from the miserable position that both I was in and my girlfriend were in before we both took charge and chose for ourselves instead of our leeching exes. We're very very happy together, we agree on everything , both financially and in everything, in 3 years we never had a fight about anything, and I am sure it's because we don't have financial troubles at all.
I wish that you make the right decision, get your life back soon.
Good luck Lisa.Well done Scamp. Some of the most sensible advice I have heard in a long time.
LLCW, I sympathise with your situation, I wish you well.
Thanks everyone for your well wishes and thoughts, my head was telling me 'don't do it girl'! ! But you know the heart says another…. I will go with what my head tells me though.
Cheers all and have a great weekend.
LisaGood advice so far. I'm a family lawyer and time after time after time, I have clients telling me their regrets at not stopping their partner from taking on more debt during the relationship. Problem comes later on (if you do split up…hope not though), and it is difficult to point the finger at the other and say that HE got you into debt etc etc. Problem can be that the Court may see the increase in debt during the relationship as something to which you consented to at the time , because of the fact that you didnt stop it when you could !! NOW is your opportunity to make an informed decision – not a 'heart' decision. Also, Guarantors should ONLY ONLY EVER agree to be Guarantor if they are totally prepared for the worst case scenario, that is, to pay the other persons debt it full. GO WITH YOUR INSTINCT!!!!!
Well said Scamp..!!
He sounds like a BAD Deal in the Extreme….
The figures don't add up. If your husband bought the house for $350K and his uncle loaned him $150K interest free, then the initial loan should have been $200K (or maybe a little more to pay for purchasing costs). He owes the bank $288K, and still has $20K outstanding debts. This means that he had approximately $100K in debts before he bought the house????
I agree with the decision you have made – don't sign. Yes, the bank may chase you for the money if things go belly-up, but it will be much harder for them. Otherwise they would not need you to sign.
Things will only get worse next year when the fixed rate expires.
By not signing you husband has only two options – persuade his uncle to extend his interest free loan, or sell the house.
Good luck!
Marg
Geez thats one of the worst things someone you love can do to you ….
"If you care for me you will do this for me… I mean come on …."
All I can say is take independant advice, so that you make a decision thats best for you and not based on your emotions.
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