From: Anonymous

Hi all, this is also my first time posting q's on the forum (great by the way!)...

i know a couple who have a 120K loan on their house at the moment, i est. their houses value is probably 250K at least, or better with a few improvements on the house, they are having alot of financial probs at the moment, and they are basically living from "paycheck to paycheck"...they have very little savings, and little excess cash to put away as savings for the future...although they have a good retirement fund, they need something to get them through the next few years...i have advised them that they should refinance their loan so that they make interest only repayment, and use the excess funds that they'll get to take out a loan on a property that they can renovate and sell on for capital gains....
i myself am very new at this game and i plan to help them through it all, i have a few q's

1. is this a sound plan? the guy is very skeptical>>>

2. should they speak to a financial advisor or go straight to ther mortgage providor?

3. what sort of information is good to know before they start to look for a property they can renovate and sell (i.e what skills should one have before they can become a good property investor esp. in this field of investing-renovate and sell for capital gains)???

i know i have put on alot in one posting....but help is needed here
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Reply: 1
From: Matthew Brooks

Hi there, an interesting collection of questions that cannot be answered definitively without more info, but here goes...

Your friends' equity position is good, so the question is 'how and why are they struggling?' Usually when investigating a financial loan structure I find that it's geared in the bank's favour, but in light of that a lot will depend on their income and more importantly on their spending habits and other debts.

You are right: to ease the pressure they would be well placed with an interest only loan, but the clincher is 'what will they do with the saved money'? If their financial difficulties are brought about through bad financial habits, the best thing possible would be to address the behaviour first.

An advisor is (almost) always better than going straight to the bank (unless they're behind on payments that is). Your friends need as much impartiality as possible.

As to question 3, the answer to that will vary depending on the answers to the first 2 questions, so I'll leave that alone.

Feel free to contact me directly with specifics if it can be of any help.

Matthew Brooks
Nutshell Investments
Personal Bankers
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