Can't make mortgage payments

Hi Techman

Yeoouccchhh!!!

I agree with Kristine and work out a deal with RHG. It is in their interest to help you because if you declare bankruptcy...they will get very little!

If at all possible get them to capitalise the break costs into your your new loan.

Worth a try?? I personally think they will go for this....as if you go under it will be a pain in the backside for them.

Cheers
Sash


Kristine.. said:
Techman1 said:
3 of the properties are with RHG. I am wondering what would happen if we just gave 2 of the properties back to them. Would it do any good to call them and ask or would it be to our disadvantage to do that?QUOTE]

I am working through a similar situation with some of my RHG customers at the moment.

RHG could not have been more helpful. We are wanting to release 1 security unencumbered from a pack of 4 securities.

Valuation came back today for the remaining 3 securities with ample equity to secure the loan, intact, remaining registered.

This is costing the customer a documents fee, a contribution to valuation, a contribution to settlement, and the standard discharge fees. All up, less than $1,000.

RHG have been their usual professional, friendly and helpful selves.

Make that phone call. There is always a solution to a problem and you may find the solution is easier than you think.

Cheers
Kristine
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We have one property on the market and we live in one and the other 2 IPs have tenants that have a 1 year lease and the last IP has a month to month tenant
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ruroshin, the guy says he has 5 properties. So from the sound of it, he's living in one of his own "IP's". He didn't say whether he's claiming the tax deductions on his "PPOR", but given he says it's an IP, then I assume he does. Hopefully the ATO will pick it up.

Techman1, i think your only option is to approach RHG and hope they are very sympathetic.

We had a bunch of properties and we weren't too concerned with the negative cash flow as they were all going up and for the last year we had been selling what we could
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Personally, just like the Storm Finance people, I have little sympathy for your lack of proper risk management.
I bet you were laughing watching your properties go up and up, hey.
 
Investor,

Whilst I agree the situation was foolhardy....I think we should give Techman1 a break. He has been very honest in sharing his experience has not assumed a higer than thou tone.

Sad to say there will be some more people on this site get into difficulties....just natural part of a downward cycle.

I agree wholeheartedly about risk management. It is easy to manage things when times are good as growth generally sorts things out and there is easy credit.

Techman1, hope you sort this out RHG....they will be ten times better off next time if you do. Best of luck!



investor888 said:
ruroshin, the guy says he has 5 properties. So from the sound of it, he's living in one of his own "IP's". He didn't say whether he's claiming the tax deductions on his "PPOR", but given he says it's an IP, then I assume he does. Hopefully the ATO will pick it up.

Techman1, i think your only option is to approach RHG and hope they are very sympathetic.


Personally, just like the Storm Finance people, I have little sympathy for your lack of proper risk management.
I bet you were laughing watching your properties go up and up, hey.
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Techman1 said:
My wife and I have 5 properties which are generating about $13,000 negative per month. We have one up for sale, nobody is buying. We could sell another one but if we sell it before July we are up for a $100,00 + capital gain and we would only net less than $15000. The problem is there is not much equity and all have fixed rates, and as you know big break costs.
3 of the properties are with RHG. I am wondering what would happen if we just gave 2 of the properties back to them. Would it do any good to call them and ask or would it be to our disadvantage to do that?

Anyone have any ideas?
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Techman, reading between the lines I am assuming lower interest rates and fiddling around the edges won't fix your problem. It appears you simply have a level of debt you cannot sustain based on foreseeable circumstances.

If you haven't yet, you need to honestly work out if this is the case.


*If* that is the case *and* you are currently in arrears, you are adding to the debt and the longer you wait the greater the loss will be.

As unpleasant as it is, chances are your position will get worse the longer you wait.

Sell, accept the loss and move on.
 
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Token Funder, you say " sell, accept the loss and move on".
I can't see how this can be done, if, for instance you owe more on the property than it can now be sold for, then the funds received from the purchase would not be enough to pay out the loan and the title would not be released for the purchaser. Right? So, if you haven't got excess funds to top this up (and if you're forced to sell because you're having trouble keeping up payments, you wouldn't have), you're stuffed! Or am I completely wrong?
 
Glucose said:
Token Funder, you say " sell, accept the loss and move on".
I can't see how this can be done, if, for instance you owe more on the property than it can now be sold for, then the funds received from the purchase would not be enough to pay out the loan and the title would not be released for the purchaser. Right? So, if you haven't got excess funds to top this up (and if you're forced to sell because you're having trouble keeping up payments, you wouldn't have), you're stuffed! Or am I completely wrong?
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If sustaining the debt load "can't be done" then there is only one alternative.

If the debt can't be paid, today's loss will be better than the same situation plus tens of thousands if late fees, recovery costs and accumulated interest.
 
TF

Will a bank release the title if an owner is drowning but manages to sell the property at a capital loss and convert the balance of the loan to an unsecured personal loan? Or consider such a thing?
 
Token Funder said:
If sustaining the debt load "can't be done" then there is only one alternative.

If the debt can't be paid, today's loss will be better than the same situation plus tens of thousands if late fees, recovery costs and accumulated interest.
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Okay, what is that alternative?:confused:
 
JIT said:
Bankruptcy :eek:!
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Bankruptcy is not that bad-it is time limited. If it has to happen, better to do it earlier I reckon.

I think a lot of PI's may well find themselves in a minski ponzi financier situation due to the financial crissis. If expected capital returns over the a 5 or unimaginably a 10 year period are zero then I suspect that 80% of PI's or greater will be in this unenviable position.

I mean think about your debt, how long would it take you to pay off based on your yearly income as the expected capital return is zero over a decade. That I reckon will be the bottom when the majority come to that realisation.
 
Techman1 said:
My wife and I have 5 properties which are generating about $13,000 negative per month. We have one up for sale, nobody is buying. We could sell another one but if we sell it before July we are up for a $100,00 + capital gain and we would only net less than $15000. The problem is there is not much equity and all have fixed rates, and as you know big break costs.
3 of the properties are with RHG. I am wondering what would happen if we just gave 2 of the properties back to them. Would it do any good to call them and ask or would it be to our disadvantage to do that?

Anyone have any ideas?
Click to expand...


Ummmmm are you sure it's $13k p/m. this would equate to around $2.6m of debt if at a fixed rate of 8% allowing for rent of $300 p/w (average on the 4 properties available for rent)and expenses of >$1800 p/m.
Would be interested in the figures, rates/terms and LVR's before passing any comment. Something just doesn't sound right.

In general I would suggest speaking to current lenders as you'll most probably find that the mortgage documents you signed have a requirement that lender be notified if you are in any financial hardship.
In regards to selling for a price that won't clear the debt associated with the property, I have had a situation with RHG about 2 years ago and they wouldn't allow the sale. This particular deal involved X-Coll and dare I say some creative figures from the original MB who did the original deal). Finally worked a way around it with an alternate lender so settlement could proceed. I'm not saying this IS possible in your case but you really need to have a chat to a MB experienced in debt solutions if some arrangement can't be reached with RHG.
In saying this, RHG could find themself in trouble taking interest of you whe they have declined a sale of a property due to hardship. What they may wish to do is have it valued (probably all of them to see where they stand) and then put it on the market themselves if they're not happy with any offer you may receive.
If you require someone, I can put you in touch with someone Sydney based who does a fair bit of work in the Newcastle area due to family being based there. Her speciality is in this area.


I know this doesn't seem to give you all the answers you were looking for but at present, insufficient information is to hand. Posting it all in a public forum though isn't my cup of tea peronally.



Regards
Steve
 
Techman1, I'm sorry to hear about your dilemma; it's an awful situation to be in.

It's time to get really creative and just keep chewing on this problem until you generate a solution. Can you refinance any and all properties to a very high LVR and use the extra money you draw off to cover the cashflow shortfall for a while? Talk to as many lenders/brokers as you can - the lenders' criteria, valuers, and LVRs can vary significantly, such that what's a "no way" with one lender, can be a "sure" with another lender. Most people seem to underestimate the differences between lenders.

Can you improve cashflow by selling one or more of the properties as a wrap?

Could you attract more buyers and/or a better selling price by vendor financing the deposit?

In the meantime, if you absolutely can't meet all the payments, at least try and concentrate the defaults in one loan. Then if you sell that property that has the loan in default, the bounced payments on that loan - provided it didn't go on for too long - won't have affected your ability to obtain future finance, as you don't have to provide statements on that loan. Whereas if all your loan statements have rejected payments on them, then a lender is definitely going to see that.

I agree with the suggestion to see a broker who specialises in debt solutions.

Good luck to you.
 
Bradsdad said:
Ummmmm are you sure it's $13k p/m. this would equate to around $2.6m of debt if at a fixed rate of 8% allowing for rent of $300 p/w (average on the 4 properties available for rent)and expenses of >$1800 p/m.
Would be interested in the figures, rates/terms and LVR's before passing any comment. Something just doesn't sound right.
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I was thinking the same thing....came up with $3.12 million debt assuming a hideous 5% differential between loan and rent (i.e. 8% loan rate, 3% rental yield) - that's $780k loan per property (across 4) or $624k per property(across 5). I guess that's plausible.

Cheers,

The Y-man
 
sash said:
Investor,

Whilst I agree the situation was foolhardy....I think we should give Techman1 a break. He has been very honest in sharing his experience has not assumed a higer than thou tone.

Sad to say there will be some more people on this site get into difficulties....just natural part of a downward cycle.
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I thoroughly agree with this.

Perhaps I may not have read the posts in enough detail, but for all we know, Techman may have been on a secure $500k salary, which would have made sense to have a handful of $800k IP's - otherwise, he would have had difficulty obtaining that sort of loan in the first place.

My assumption is that something has happened to this income source - and hence the current issues.

Yes, the risks were there, but many of us (myself included) carry similar risks :eek: One of them is illiquidity, as experienced by Techman and several others on this forum, which I have had the dubious honor of having also experienced in the past 6 months :).

I chose inner city properties at the lower end of the market with the view to mitigating the liquidity risk. Unfortunatley, when it came time to sell, the properties sat on the market for 3~4 months without an offer (one has now got an offer, another is still on the market waiting for a bite).

Cheers,

The Y-man
 
Will a bank release the title if an owner is drowning but manages to sell the property at a capital loss and convert the balance of the loan to an unsecured personal loan? Or consider such a thing?
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That is exactly what happened to people we knew back in the 1970/1980s (?) recession. They sold their house but still had to make payments to the bank to make up the shortfall.

Not sure if it can still happen, but surely it is better for the lender to arrange for the loan to be repaid in full.
Marg
 
contrary said:
I think a lot of PI's may well find themselves in a minski ponzi financier situation due to the financial crissis. If expected capital returns over the a 5 or unimaginably a 10 year period are zero then I suspect that 80% of PI's or greater will be in this unenviable position.
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Anything to back this up or is it just wild guesses and wishful thinking?

Dave
 
If expected capital returns over the a 5 or unimaginably a 10 year period are zero then I suspect that 80% of PI's or greater will be in this unenviable position.
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I think 80% is far too high. The majority of people who own IPs own just one. And many aged 40+ will have memories of the last recession and will have borrowed well within their means.

IPs bought prior to the last price boom should be close to cash flow positive by now.


I mean think about your debt, how long would it take you to pay off based on your yearly income as the expected capital return is zero over a decade.
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It is the rent received that assists in paying off the loan. Even if the property's value falls, that will not affect the repayments, only the eventual profit or loss on sale. And so far all evidence shows that rents are, at worst, holding steady.


Yes, a few will get their fingers burned, that happens in every recession. These will probably be those who invested recently and aggressively. But for those who invested prudently (there's an old-fashioned word) then it should be steady-as-it-goes, and opportunities will still arise.
Marg
 
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