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#1 ...

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Posted 27 May 2005 - 09:28 AM

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#2 Who knew?

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Posted 27 May 2005 - 10:03 AM

Hi Amy,

We're in the situation you describe - an investment and a house. I had nearly 100K equity in my unit (bought it just before the boom - pure luck, but very handy). So when we went shopping for the house we used the equity in the unit for the deposit. However, we only spent what we could afford in terms of repayments - not in terms of how much equity we had (and hence how much the banks would have lent us). Having said that, we now also have over 80K equity in our house, because we beat the price rise in the area we bought in (I have to say, we have been very very lucky in our property purchases).

Even though we had no deposit for the house, I had saved all the money for the stamp duty, legal fees, etc. I haven't made any extra repayments on the investment, because the interest and other costs associated with that are tax deductable, and you actually lose out in the long run if you pay it back too early. I set my rent about $20 - $30 a week less than my repaymeny figure - making up the rest from my salary - so I can take full advantage of the negative gearing.

If you are going to pay back any loan early, I would sock all your extra money into your residential mortgage, as you are not getting any tax benefit from that. However, the more you pay off the higher the equity you will hold in your home, and that can then be made to work for you should you choose to buy another investment property, or get an investment loan for shares, etc.

I just want to add that this is all my own personal experience and knowledge/opinions. I am not a banker or a financial manager - this is simply our experience. I know there are others on this forum who have professional knowledge in this area, and of course you should always consult experts with regard to your own situation (which I know you will Amy - just wanted to make it clear to everyone I'm not trying to pretend to be an expert!)

Good luck with it. I will say this - if we can do it, anyone can!

Cheers,
Jen
Jen

PG & hatching on 22 May 2007

#3 Who knew?

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Posted 27 May 2005 - 11:52 AM

No worries Amy - I know exactly what you are going through.

With regard the rent/repayment difference, I know am pretty lucky given my repayments for the unit are not that much different to the rent. $200 is a pretty big gap though. Is there any way you could maybe reduce the repayments - refinance for a longer loan period, or even switch to an interest only loan, until you are working full time again and your joint income increases? An interest only arrangement may be something to look into, especially as it is only for a limited period, and you will still get the benefits of negative gearing.

Again, I am not sure of the practicality of any of this, or even if it is possible, but maybe something to ask about when you are looking into all the angles?

Cheers,
Jen
Jen

PG & hatching on 22 May 2007

#4 Who knew?

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Posted 27 May 2005 - 03:00 PM

What a gorgeous looking house Amy - I can see why you want it! Still, if there is one thing we can all be sure of, that is that there will always be a gorgeous house around the corner - no matter when you are looking! (I'm not even looking and I find them all the time!!)

I'd definitely look into refinancing your unit, as I am sure you can get a better deal now you have probably paid off a fair amount (and also because the value has probably increased). Either way, I'm sure you should be able to get your repayments down without too much trouble.

You never know what is around the corner - and I am sure you will a 2 mortgage family before you know it (sounds weird to be wishing you could have 2 mortgages, doesn't it? But then, I always was a little strange...)

Cheers,
Jen
Jen

PG & hatching on 22 May 2007

#5 gidget

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Posted 18 October 2005 - 12:29 PM

Just noticed this post, and it applies to me as well.
I have an apartment in Sydney, because we live in Hong Kong I rent it out. I need to top up around AU$200 a month to keep all of the payments up, as the rent does not cover it.

As I do not earn an income in Australia, I can't reclaim that loss in negative gearing, therefore I am about to put another lump sum onto the mortgage so that I can bring it down towards paying off the loan rather than just the interest which I am doing at the moment.

That would mean I would have quite a bit of equity in the apartment, as I put down a 20% deposit at the start to avoid mortgage insurance.

We want to buy a house to live in when we move back to Australia, but that could still be a few years away.
Will we be able to use the equity in the apartment instead of a deposit on the house? Providing the equity is more than 20% of the value of the house, does that mean we will avoid paying mortgage insurance on the house mortgage?

If so, we just need to save the stamp duty, conveyancing to buy the house right?

#6 Mz Sazzy Angel

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Posted 18 October 2005 - 08:42 PM

QUOTE (Amy K @ Oct 18 2005, 09:36 AM)
We saw a new mortgage broker last night, a friend's BIL. He was brilliant! He showed us that we can definitely keep our apartment, and buy a house soon - probably in around 12 months (have a bit of saving to do first!). It all makes sense now - the way he demonstrated, keeping the unit will only cost us around $150 per week. biggrin.gif


Amy does that mean that he has discounted you $50? Gap before was $200 & now it's $150 is that right? Btw I wouldn't mind having $2m worth of property by the time I'm 25 tongue.gif
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#7 SheikYerbouti

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Posted 18 October 2005 - 08:55 PM

I guess my answer is that we know how much we can have/afford, and we don't worry about any more than that.
We don't need/want a 5 b/r house or 2 new cars or whatever, so we're not stressed about trying to afford it. On the other hand we both are on good salaries and prefer to have a few nice things than piles of junk.
We sold our flat to easily afford a lovely 3 b/r house on Syd nth shore.
We could possibly have stretched the budget for several years, and afforded to keep the flat, but really, we weren't fussed.

#8 Heather

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Posted 31 October 2005 - 10:57 AM

Just my 2 cents but you wouldn't have $2m worth of property by 25, just $2m worth of debt on property that you hope will still be worth $2m plus all the interest you have paid by the time you want to sell it - thats scary.

#9 Michael's B2B, Sarah

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Posted 31 October 2005 - 12:52 PM

We have an investment property in Newcastle - nothing big, but it has been slowly increasing in value which is good.
We also have our house that we live in at Berowra.

It'd be great if you could keep the unit, but if it ends up being a hassle, definitely get rid of it. If you can plod along and it isn't too hard to make the repayments, it's great having an investment property.

We are the same as you in that we know we won't become rich from property, but hey as long as we aren't stuggling we'll hang onto it.
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#10 Heather

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Posted 01 November 2005 - 06:01 PM

QUOTE (Amy K @ Oct 31 2005, 10:17 AM)
As I've said all along, I'm sorry if I came across otherwise, as money-hungry or something sad.gif , I'm definitely not - I work for a charity!

I didn't mean to sound that way. Sorry if I came across harshly.

What I was trying to point out is that I think a lot of people get sucked in by developers and financiers and don't realise what they are signing themselves up for.

It may all look rosy now but what if interest rates hit 18% and they don't have a tenant? Noone will be able to aford to buy the property so they can't sell it, they aren't getting an income and still have to come up with the repayments + interest.

This is why (I think) financiers sign others up to do this stuff and not themselves.




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