To sell or not to sell... how can I structure a new mortgage?

Hi all,

My wife and I are currently looking at selling and moving to a semi rural house (both in SEQ).

Currently the finances are:

PPOR
Worth 350k
Owe 250k

Income
70k & 60k

We are about 2 weeks away from putting it on the market to sell, using the 100k to pay of personal debts and purchase a new house (LVR to be about 97%), and have some change in the bank (10-20k for renos, contingency, etc).

Because the wife has just started her job, she was not included on the new home loan application (pre approved on my wage only to 350k), although we are both on the current house.

Now this has got me thinking……is there a way to hang onto the house as an IP?

I'm not sure how lenders work with our current arrangement.

My idea was to:

Rent the house out for 350 p/w (I have confirmed this is the going rate for the area)
Continue to pay the mortgage 2000 p/m
Utilise the equity to pay off the debts and as a deposit to obtain a new mortgage for ~300-350k (repayments 2100-2400 p/m) - Not sure how this would be structured….??

On paper, the repayments are not an issue as we have 2 wages, however only mine is being used on the new house mortgage. How would a lender view the current mortgage and future rent to the new mortgage? Would it count as 1k loan outgoing (half) and additonal income of 175 p/w against my salary?

Can anyone suggest a solution to hang onto the current house or would it be best to sell up and start afresh again?

Thanks!
 
Generally (depending on the lender) rental income or part thereof can be added to your income for serviceability. It sounds to me like after taking the $100k off for personal debts ... you're leaving yourself short.

Suggest you find a good mortgage broker :)
 
After a quick brain storm, I am leaning towards the following:

Wife to Lo Doc refinance to 90% on current ppor - leaves 65k LOC
Pay off 50k personal debts

Leaves 15k for mortgage under my name for new ppor - Standard loan at 97% for around 325k.

Just a question - will there be any issues when refinancing going from a joint mortgage to a single name?

Overall, serviceability is not an issue, just whether someone will finance this arrangement.

Can anyone see any issues or a better way to do this?

Cheers.
 
Hi Gusto,

You've indicated that your wife has recently started a new job. Most lo doc loans are only available to people who have been self employed with an ABN for 2+ years.

You can increase the loan against the existing property to pay off the personal debts and have a deposit ready for the next house. You can do this solely on your income. You'd leave the loan in both your names, but you simply don't declaire her income.

You can then purchase the new property. You will need your wife's income for servicing to do this, or you would require a lo doc loan (assuming she meets the criteria for a lo doc). With the right lender, this can be acheived without any problems.

The real concerns that would be asked relate to you and your wife keeping your jobs after the move. This is assuming that the new property is a long way from your existing workplaces. Even if this is the case, there are ways of getting around this as well.
 
Thanks PTBear.

Not having looked at lo doc's before, I came across some that include PAYG employment (iirc, one said something about employment of 30 months in the last 3 years). She has never been out of a job, it is just we would prefer not to wait another 6 months to meet the full time employment requirement for a standard loan.

'With the right lender……' do you have any suggestions for a lender that is fairly accomodating?


Thanks.
 
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