What would you do - to sell or not to sell.

I own a house which is CG exempted. It is worth 150000 and has a mortgage of 50000. So I want to free up this cash to buy 2 more properties. If I sell all the costs involved with buying will be wasted. If I sell to buy another two I will have to fork out to buy them. Sometimes I hear of banks loaning against the equity. This mortgage is with Homestart and just now they said unless I live in the house with the present mortgage or the new house I am not able to have a home equity loan with them. Their not in the business of financing investors. Would another leading institution look favourably in this situation? What would you do and why? Do you need more information? Keeping the house is fine for lots of reasons. I know it back to front and it will continue being a good performer. Are there any other options I haven't thought of?
 
Speak with a good broker. They will be able to help you with work out your serviceability. They will take into account your PAYG income, together with your rental income and work out if you can refinance elsewhere. If Homeside won't play ball, another lender might.
 
if CGT exempt and good prospects of CG i would probably keep it. Normally any CG is subject to ~ 20-25% in tax when selling, so if yours goes up ~ 7.5% then that is the equivilent of ~ 10% on your new ones.

i would look to options of drawing equity to buy another one. This all comes down to CG and cashflow though. Perhaps a bit more information might help?
 
if CGT exempt and good prospects of CG i would probably keep it. Normally any CG is subject to ~ 20-25% in tax when selling, so if yours goes up ~ 7.5% then that is the equivilent of ~ 10% on your new ones.

The absolute max CG would be 22.5% + medicare levy on the GAINS, not the whole amount. And that assumes you're already on taxable income of 180k.

It's impossible for tax to be 25% of the proceeds / market value unless you're not getting the discount. Even 20% would assume almost all of it is gains, i.e. a very very low cost base.
Alex
 
Serviceability - is the ability to pay back the loan over its term. I think I am right in saying that. For me this is not a problem b/c the two properties I buy will be neutral or very marginally negative geared properties. If I kept the house and just leave everything as is then I wouldn't free up the cash to buy two more and not sure if it is still CG exempt. There is only 6 years on the abscene rule with the tax office so by next year it gets more complicated. People talk about accessing the equity in terms of cash to purchase more but I find it hard to know where to discover info on this. If it is not a leading institution then where could I go for the money to purchase. Hope that helps.
 
Serviceability - is the ability to pay back the loan over its term. I think I am right in saying that. For me this is not a problem b/c the two properties I buy will be neutral or very marginally negative geared properties.

Not exactly. It's what banks THINK you can pay back. That might not be the same as what YOU think you can pay back.

If I kept the house and just leave everything as is then I wouldn't free up the cash to buy two more and not sure if it is still CG exempt. There is only 6 years on the abscene rule with the tax office so by next year it gets more complicated.
That's different. Why is the house CGT exempt? Have you lived in it before and are now using the 6 year rule? If so, what are you planning to do after the 6 years is up? But generally, changing the borrowing on a property doesn't change its CGT exempt status.

People talk about accessing the equity in terms of cash to purchase more but I find it hard to know where to discover info on this. If it is not a leading institution then where could I go for the money to purchase. Hope that helps.

In practice it just means taking out a bigger loan against the house and getting extra money after you pay out the old loan. When you say 'leading institution' people assume you mean the big 4 banks. There are plenty of other lenders out there. A mortgage broker can help you here.
Alex
 
What do you mean by CGT exempt? Is it your PPOR?

The only true CGT exempt properties are those bought before CGT was introduced (in 1985?). These assets should be retained if at all possible.
Marg
 
Thanks for the continued discussion. Firstly serviceability will not be a problem. Talking with Westpac today I suggested some other ideas and serviceability was not an issue. I also suggested my mum buy the house cheaply from me and I buy it back in a couple of years time. It would cost to much though doing this. Secondly the house is CGT exempt b/c I lived in it in 2006 and so since that time haven't lived in any other house just back to mums, hence the abscene rule. Thirdly I am aware of other lending institutions as I have used Homestart which is who this mortgage is with. Talking with them they are not prepared to draw down on the mortgage as they said I would have to live in it or in the newly purchased house. Also in their own words their not in the business of financing wealth creation projects. When I have the time seeing a broker seems to be the next best step. The house is in the paper this Sat so see what happens. I do favour selling it as it frees up all that money and I do like purchasing, it's fun. Cheers again
 
Say you move in at the end of year 5 of living at mum's place, if you stay it's your PPOR and stays exempt right ?

What happens if you move in for x mths and then move somewhere else ? does the CGT exemption apply for another 6 years ?
 
My neighbour has a homestart loan and I bought a homestart repossession. They are very strict on the "you must live in the house" criteria. Both of the houses came under interest because their owners weren't living in them - I actually had the bank knock on MY door looking for my neighbour once when his house was empty. So homestart is 100% out of the question.

Not exactly. It's what banks THINK you can pay back. That might not be the same as what YOU think you can pay back.
This is so true. We are currently saving around $600-900 a fortnight over and above all living expenses and after the mortgages. My credit union won't lend us a cent (according to their criteria I already have $80,000 more debt than they'd give us) and the bank thinks we are on the edge and the only thing that can get us a loan is rental income pushing our serviceability up and we will be applying for a $200 a fortnight loan and all our loan repayments combined will be lower than combined rent. Yet people who earn twice what we do are struggling and living off credit cards. It is unbelieveably annoying how they don't take individual circumstances into account.

Go play with some mortgage calculators online and you'll see what I mean.
 
Build a relationship with a great mortgage broker. They may be able to get your foot in the door for you as they have access to many executive bankers and are able to see your individual situation.

Cheers

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