Hey guys, I have only just discovered this site, I wish I had been aware of it a lot sooner!
I have been ridiculously careless with my money in the past, and am now determined to turn it all around. Ok, here is my situation, I'm putting it all on the table:
I am 33 years old, my wife and I are owner occupiers in an older style 2 bedroom unit on the Gold Coast, and we owe $245K on it. We bought it for $270K in 2007, but the market has obviously slumped since then. I am going to get it evaluated in the next 2 weeks, and I am thinking that it will be valued at around the $245K mark, giving us zero to very little equity in the property.
I am a fly-in fly-out worker, earning around $150K per annum. My wife does not work.
We have credit card debt of $17K. Stupid I know, believe me. The debt is spread across 2 low rate balance transfer cards of 2.9%. We are trying to knock this down as much as we can every week. We also owe around $2500 on our personal loan for our car.
I have just under $90K in Super. My wife has around $20K.
We have just (this week) come out of a five year fixed mortgage rate of 8.54%!! It will now revert back to 6.1%.
I am EXTREMELY eager to begin investing as soon as I possibly can, but need some direction.
Any advice as to where to go from here??
6.1% is still a high rate, but much better than 8.54%. You may be able to better that.
Probably best to focus on the $2500 car loan, get that out of the way. How long is the credit card debt 2.9%? Probably is an idea to save up a sum of money into a 100% offset account on the home loan as this is a higher rate.
When you have a small lump sum available ring or write to the credit card company and offer to pay 50% of the debt for a final settlement.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Mikko,
having come from a very similiar situation myself I can relate to your situation. My best advise would be to be patient and just get rid of the personal loan straight away. Then focus all efforts on 1 credit card at a time and get rid of it asap. Once both are gone you firstly can stress less but then focus on getting some cash money in the bank……stay tuned to this forum as there are some very knowlegable people on here who can offer you lots of top notch advice, good luck.
Also, I would not get a valuation on the property from your current lender as it sounds possible that negative equity might be realised (property worth less than the amount owing on mortgage) in which case the lender could put their hand out for a lump sum to bring the LVR to an acceptable level.
Oh and 5 years at 8.54% !! That's incredible
Hi
This is a great place to start. One advantage about your situation is that it might not make sense to buy immediately, which many do without taking the time to educate themselves and get setup.
While paying down your debt and getting ready to buy, I would suggest learn as much as you can about the following
-different types of property, areas that you want to purchase in and how to identify a good investment property.
-structuring both entity structuring and finance
-Self Managed Super Fund, although not large, your employer contributions would be and that combined with the 90k in the account may allow you to setup an SMSF and buy a property in it
-your strategy, what you want to acheive, what your risk profile is, how do you think you might acheive what you want to, do some goal setting etc
good luck and great spot you live by the way. I had a weekender in Burleigh for years, problem was that with my kids getting older and doing more and more on weekends I just wasn't using it, so had to flick it.
regards
Darryl
D
RPI | Certus Legal Group / PRO Town Planners
http://www.certuslegal.com.au
Email Me | Phone MeProperty Lawyer & Town Planner
Thanks for the responses guys!
Terryw – One of the credit cards is 2.9% for life (assuming I don't make any transactions), the other is 3.9% until October.
Offer to pay 50% of the credit card in one hit, and the banks may wipe the rest? Is that possible?
Wakebrownb – Yes I agree, it makes sense to pay off the higher interest rate first, so that is what I will do.
Rick sta – Sound advice! I hadn't thought of that at all. Thank you.
RPI – I have considered setting up a SMSF, I will investigate further. And you are right, I need to make firm goals so as not to wander aimlessly.
Thanks again guys, much appreciated.
Now, I'm off to shop around for a lower mortgage interest rate!
Mikko.
Yes. credit card companies do make deal. The offer they give you will depend on your ability to pay and your hardship story together with the likelihood of them being able to squeeze money out of you if you go down. I have helped people get 50% off a few times.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Mikko rest assured you are not alone. CC debt is all too common. You are now on the pathway to recovery. Set the goal and do not allow distractions. Make the most of your high income. Work this forum, research all the advice, look into what areas may be a good fit for your goals. SMSF is a sensational strategy unmatched in the tax benefits. Takes a lot of research and knowledge. Get a good team around you.
Good luck
PS I would steer clear of the Gold Coast for a while
Most banks price on risk – i.e. LVR so if possible try and get an upfront valuation (its free with most lenders) to see where you stand.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Well, considering that our initial credit card debt was a staggering $32K, I think we are well on our way to recovery.
Terryw – I will definitely give that a try. I think it might be a bit tricky to pull off on my current income however.
Taxdiva – You don't see the Gold Coast beginning to recover anytime soon?
Shahin – I have been advised previously to use a private evaluator as opposed to using the banks. What are the pros and cons of either?
Thanks again guys.
Mikko.
Hi Mikko,
Don't use a private valuer!
Firstly, the bank takes and uses their own valuer so no point in getting your own valuation with company "abc" if the bank is not going to use this.
Secondly, most banks offer free upfront valuations so its win/win.
Talk to your banker and broker and see why you are paying 6.10% and about the upfront valuations.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi Mikko
Any professionals you decide to recruit, be sure you are comfortable in their street cred, or because someone whose opinion you hold in high regard has referred you to them. Beware of folks that lurk on forums adding no value by sharing knowledge, but trying to drag in your business (looking after themselves but nobody else). An example is Antonio Santolo above who has only three posts to his name all of which are spam.
As Rick Sta says, under no circumstances do you want your current lender (ie the bank that currently has the mortgage over your place) doing a valuation on the property. If it is worth less than what you owe, they could very put their hands out and ask for the difference.
Terry has hinted about a few things that can be tidied up… he's in the mortgage broking business, why not give him a buzz and chat about sorting everything out.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
ps I personally think you would be better off getting your financials in your own names in order before you embark on running your own super fund. Those things need to be squeaky clean. I have a self managed super fund and I feel great comfort in knowing that if my little super fund needed some cash, I could find that cash outside of super and donate it in. If you have personal debt that'd be a challenge. When you get a self managed super fund, you want to be using it to be in the driver's seat, driving your finances in a positive direction. You don't want your self managed super fund to simply give you another avenue to dig yourself into deeper strife.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Fair points JacM. I've taken it all on board. I'm thinking that eliminating all of the credit cards and personal loan first should be the way to go.
Thanks,
Mikko.
It's not the solution I was hoping for, as I was wanting to get into the investing game as soon as possible. But I think it is the sensible way.
No worries. Remember that when you buy an investment property, you'll be needing a mortgage… and part of the mortgage application process is that the bank will look at your credit file. A credit file is held on everyone, and things like credit card debt or faliure to pay a telephone bill will show up as "bad events" on your credit file. Similarly, a rejection to a mortgage application gets stamped onto your credit file, making it even harder to get a loan next time.
When you've tidied up your credit card debt and feel you are ready to look at in investment property, don't apply direct to the bank. Use a great broker who will know exactly which bank to apply for given your circumstance, without risking a rejection. Be sure to be honest with the broker about things that might affect your credit file (events stay on there for 5 years) so there are no surprises.
Better still, you can request a free copy of your credit file here: http://www.veda.com.au/ . That way you know exactly what the bank will see when they hit your credit file for a look see.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Actually Jac all applications are recorded on the credit file, whether approved or not. Incidently you can still negotiate a settlement with the credit card companies and pay out part of the debt as full and final settlement without anything appearing on your credit file about this. But you must have the lump sum to do so – generally.
I would be more inclined to save extra cash into an offset account and then get the benefit of only paying 2.99% on the credit card (suncorp?). This should save you more interest and enable a lump sum to be built up.
But having the credit cards could impact on serviceability, so it all depends on your situation…
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry,
Yep I knew all applications were recorded. In Mikko’s case I was wanting to highlight avoid getting an application rejected. I didn’t know about the credit card lumpsum payment thing though. Very interesting. Cheers for sharing!
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Just another thing, I salary sacrifice $120 into Super every week. Would you guys recommend continuing to do so? Or would it be more beneficial to me to save and invest the money elsewhere?
You must be logged in to reply to this topic. If you don't have an account, you can register here.
