So here is the latest idea. Would appreciate some thoughts as this is all new to us, having never owned anything more than PPOR.
Background
Wife, 2 kids (9 & 7). Combined income $220k.
Current PPOR is a beautiful, large home in Sydney's north.
We owe $1mill on it, IO for another 4 years then P&I for 25 years. 100% offset.
No other loans.
Last bank val was 12 months ago when we refinanced with a Big 4. Thought it was a little light at $1.3m, but we didn't push the point because it was enough to keep our $1mill under 80% LVR.
No IP's.
Idea
As much as we love the home, we now feel like we would be content with something a little less grand in return for a lower mortgage, less stress, paid off sooner etc etc.
Of course, perennial problem is that whilst we see now as a good time to buy, we know it is not a great time to be selling.
Agents are saying our place would get about $1450k - $1500k, although in current market that could just as easily turn out to be $1350k which to me would be giving the place away.
We have found a place nearby that is not too big a downgrade and say we bought for $950k and sold for $1380k, we could bring our mortgage down to $650k which is the sort of thing we are looking to do.
However, even selling at $1380k would seem like we are throwing money away by not waiting for the market to improve.
Ideal solution would be to buy now and rent our current place for 5 or 6 years and hopefully by then the market has picked up a bit and we can sell our current place for a much better price and reduce the remaining mortgage even more.
Current place would rent for $1,500 per week.
Ideally, I would like to get current PPOR valued at $1425k to allow us to borrow another $140k at 80% LVR on that property.
Using that $140k and buying at $950k, we would need to borrow $850k at 89.23% LVR on the new property (no cross collateralisation, open to whether it would be with same bank or different bank to 1st property).
I appreciate this would would require LMI - from what I gather, around $15k on these numbers (someone confirm?)
Total borrowings would go from $1mill to $1.99mill (so much for reducing the mortgage)
We realise that in the short term until we sell our current PPOR, this little strategy wont help our financial stress (probably increase it), so the plan may be doomed to fail before we start but we are just trying to see if there is a way to get ahead over the next 10 years other than just hoping to win Lotto (which will be difficult as we hardly ever buy lotto tickets).
Not knowing a lot about IP's, I'm figuring the rent less rental expenses will cover the interest only cost on the existing $1mill (or close enough to covering it), leaving us to repay the other $990k of borrowings from our salaries, which is what we are doing now anyway.
Are we mad to be even thinking about something like this ?
I know getting a bank val of $1425k for our current property will probably be a stretch and there are no guarantees the market for our place will yield any better price in 5 or 6 years time to justify the stress of carrying $2mill in debt for that time.
We probably should be looking to buy at $800k, not $950k, but that is likely to require too much of a downgrade and therefore not the trade off we would be willing to make.
On a more practical note, maybe we are dreaming to think anyone would lend us $1.99m on our current income + (expected) rent.
Would appreciate your feedback. Reality checks will be accepted with the good grace in which they are given.
Maybe we should just buy and sell now and be happy with reducing the mortgage by $350k.
Forgive my newbness.
Background
Wife, 2 kids (9 & 7). Combined income $220k.
Current PPOR is a beautiful, large home in Sydney's north.
We owe $1mill on it, IO for another 4 years then P&I for 25 years. 100% offset.
No other loans.
Last bank val was 12 months ago when we refinanced with a Big 4. Thought it was a little light at $1.3m, but we didn't push the point because it was enough to keep our $1mill under 80% LVR.
No IP's.
Idea
As much as we love the home, we now feel like we would be content with something a little less grand in return for a lower mortgage, less stress, paid off sooner etc etc.
Of course, perennial problem is that whilst we see now as a good time to buy, we know it is not a great time to be selling.
Agents are saying our place would get about $1450k - $1500k, although in current market that could just as easily turn out to be $1350k which to me would be giving the place away.
We have found a place nearby that is not too big a downgrade and say we bought for $950k and sold for $1380k, we could bring our mortgage down to $650k which is the sort of thing we are looking to do.
However, even selling at $1380k would seem like we are throwing money away by not waiting for the market to improve.
Ideal solution would be to buy now and rent our current place for 5 or 6 years and hopefully by then the market has picked up a bit and we can sell our current place for a much better price and reduce the remaining mortgage even more.
Current place would rent for $1,500 per week.
Ideally, I would like to get current PPOR valued at $1425k to allow us to borrow another $140k at 80% LVR on that property.
Using that $140k and buying at $950k, we would need to borrow $850k at 89.23% LVR on the new property (no cross collateralisation, open to whether it would be with same bank or different bank to 1st property).
I appreciate this would would require LMI - from what I gather, around $15k on these numbers (someone confirm?)
Total borrowings would go from $1mill to $1.99mill (so much for reducing the mortgage)
We realise that in the short term until we sell our current PPOR, this little strategy wont help our financial stress (probably increase it), so the plan may be doomed to fail before we start but we are just trying to see if there is a way to get ahead over the next 10 years other than just hoping to win Lotto (which will be difficult as we hardly ever buy lotto tickets).
Not knowing a lot about IP's, I'm figuring the rent less rental expenses will cover the interest only cost on the existing $1mill (or close enough to covering it), leaving us to repay the other $990k of borrowings from our salaries, which is what we are doing now anyway.
Are we mad to be even thinking about something like this ?
I know getting a bank val of $1425k for our current property will probably be a stretch and there are no guarantees the market for our place will yield any better price in 5 or 6 years time to justify the stress of carrying $2mill in debt for that time.
We probably should be looking to buy at $800k, not $950k, but that is likely to require too much of a downgrade and therefore not the trade off we would be willing to make.
On a more practical note, maybe we are dreaming to think anyone would lend us $1.99m on our current income + (expected) rent.
Would appreciate your feedback. Reality checks will be accepted with the good grace in which they are given.
Maybe we should just buy and sell now and be happy with reducing the mortgage by $350k.
Forgive my newbness.