who has these $400k mortgages ?
- Thread starter WillG
- Start date
Really? I (a mere novice) am considering this as a strategy to get into a more upmarket PPOR myself:
OPTION A:
Pay off $240K debt on $400K PPOR in 10 years and THEN sell and upgrade.
OPTION B:
Sell current $400K PPOR immediately and upgrade to $600K PPOR with $440K mortgage (minimising asset exposure and serviceability for IPs); OR
OPTION C:
Use the same money I would use to pay off $600K PPOR in Option B to continue paying off $400K PPOR as well as one, two or three cheaper IPs (already acquired one worth $330K). This way, rather than having $400K of asset exposure I would have maybe $1M-$1.5M. Then, after 5 years or so (depending on market conditions) I can sell off the PPOR and one or all of the investment properties in order to upgrade to the up-market PPOR with a much lower LVR. Then I would borrow against that equity to purchase IPs once again.
Wouldn't that be the easiest way to transfer a whole heap of equity in various properties to a PPOR?
Each to his own, Lukey. There are certainly many ways to do it. It's so personal and depends so much on circumstances that's it's impossible to evaluate which is the better way. As usual, I stick to the plan I believe most in. Because I believe it, I'm more likely to stick to it and I am more likely to succeed at it.
In my case the PPOR loan doesn't seem like as big a deal because the PPOR (both in terms of gross assets and the mortgage) is only a small part of my portfolio. I have enough serviceability and existing equity in the IPs to continue to buy IPs. If I had to sell my IPs, I would be up for a decent slug of CGT.
In my plan, the paid off PPOR is not the main goal. My 'dream home' is much more expensive than I can afford anyway, so I need to build up other assets first.
Alex
In my case the PPOR loan doesn't seem like as big a deal because the PPOR (both in terms of gross assets and the mortgage) is only a small part of my portfolio. I have enough serviceability and existing equity in the IPs to continue to buy IPs. If I had to sell my IPs, I would be up for a decent slug of CGT.
In my plan, the paid off PPOR is not the main goal. My 'dream home' is much more expensive than I can afford anyway, so I need to build up other assets first.
Alex
I personally would never do this. I'd be using the $24k a year to recycle the PPOR debt and keep buying IPs. If I had to choose, I would LEAVE the 240k non deductible debt and buy IPs anyway.
My current PPOR is my first one, so I don't have the choice of upgrading. I already have IPs and will continue to buy more.
I bought my first IP 8 years ago, and only bought my PPOR last year. These things really depend on individual circumstances. My circumstances are different to yours. My asset exposure is not just limited to my PPOR, so I don't really need to choose between paying off the PPOR and buying more IPs. Given that I can save from my salary and refinance to access existing equity from the IPs, I can do both. I put down a decent deposit on my PPOR, and have no need to access the PPOR equity.
However, I do not plan on selling my IPs to pay off the PPOR or recycle debt faster. At 30, I'd rather focus on maximising my gross asset base and just ride the compounding growth.
Alex
It's human nature
. It's easier to whinge that to work things out. The media is on the whingers' side too which makes it "OK".I see. I thought you've won lotto or something
That's an accepted risk, at least we can still service the loan and keep the PPOR.
hmmmm... only last July my new PPOR mortgage was a cool $860K, it's now down to $720K and going down fast. The value of my PPOR represents about 30% of my total property holdings with a relatively low LVR, we can afford the interest and have a plan to pay it down real fast - so although it seems crazy - it's very manageable in the overall scheme of things.
Like most things it's not as simple as looking at just one number, but many variables, applying to your own situation. A mere 400K mortgage for me would be reason for celebration.
Like most things it's not as simple as looking at just one number, but many variables, applying to your own situation. A mere 400K mortgage for me would be reason for celebration.
"I think the idea of using proportion of income needed to service a loan is perhaps incorrect.My conclusion, I guess, is that to classify people as 'struggling' because of a percentage of income issue doesn't necessarily reflect what's really going on".
I totally agree with this comment. My partner and i are both 21 with a combined income of 130K before tax. Out total debt has now reached 800K. We own our cars, have 0 kids, dont get out much and spend very little on 'ourselves'. I believe we live comfortably (im not denying that things can get tough), but i dont think of us as 'struggling'. We are renting a rundown house in central QLD for $250 a week whilst building our house at the beach. I get very tired of copping criticism from people that i work with about investing all of our money in property. Comments consist of " rate rises must be hurting you..haha...(big smirk on their faces) or " you're too young to be in debt...you shouldnt have such big responsibilities at your age". Yes i'll admit our repayments are huge....and we arent the average 21 year olds...but we're doing this for our future...any comments anyone?
I totally agree with this comment. My partner and i are both 21 with a combined income of 130K before tax. Out total debt has now reached 800K.
We own our cars, have 0 kids, dont get out much and spend very little on 'ourselves'. I believe we live comfortably (im not denying that things can get tough), but i dont think of us as 'struggling'. We are renting a rundown house in central QLD for $250 a week whilst building our house at the beach. I get very tired of copping criticism from people that i work with about investing all of our money in property. Comments consist of " rate rises must be hurting you..haha...(big smirk on their faces) or " you're too young to be in debt...you shouldnt have such big responsibilities at your age". Yes i'll admit our repayments are huge....and we arent the average 21 year olds...but we're doing this for our future...any comments anyone?
You're too young to be in debt
I'm being serious now with a perhaps amusing statement:I wish I had that much debt at your age. I didn't get to 800k debt until I was 28.
Good job.
Repayments by themselves mean nothing. It must be viewed in relation to your rents and other income. Debt levels by themselves mean nothing. It must be viewed in relation to your asset values.
Alex
Good on you both. I wish I had been in your situation when I was 21. Took me years and years to get there. You are both doing v well.
There you go; you know that you're an anomaly. Let the average smirks and move on. We'll see who smirks in 5-10 years time
.
we spent stupid bucks getting into Burns Beach - less than 200m to the beach.
with our combined deposit we got the total mortgage to under $550k after house is built - which for anyone considering buying in the dress circle of Burns, will understand thats a HUGE deposit.
i am self employed and earning pretty good money and trying my damndest to earn more. while my ability to gear myself further is very limited now, i have wealth building strategies in the wings to increase my offset mortgage account size to eliminate the interest component of the mortgage. i can then pay down the principle and when paid i can withdraw over $550k in cash and go play. i have no serious cc debt (<$1000) either.
does that sound like a good thing to be doing? i still question it sometimes.
with our combined deposit we got the total mortgage to under $550k after house is built - which for anyone considering buying in the dress circle of Burns, will understand thats a HUGE deposit.
i am self employed and earning pretty good money and trying my damndest to earn more. while my ability to gear myself further is very limited now, i have wealth building strategies in the wings to increase my offset mortgage account size to eliminate the interest component of the mortgage. i can then pay down the principle and when paid i can withdraw over $550k in cash and go play. i have no serious cc debt (<$1000) either.
does that sound like a good thing to be doing? i still question it sometimes.
people's perception of HUGE differs, for instance I would qualify a 2m+ deposit as huge, anyway I hate NDD and am wrestling with myself to borrow more for some PPOR improvement. Unless you are on a few hundred k a year I would think that the interest, say @ 8.1% = 44k odd of non-deductable debt a big burden and an obstacle to create wealth, unless of course you've purchased something with development potential.
That sort of interest for the average joe on a six figure salary, will slow down your ability to buy more ip's and that is the road to freedom...
pieman
My gf and I have a 370k mortgage on our PPOR...we're mid 20s, make 100k+, and don't really have an issue with it? The house is worth a crapload more than the mortgage now and because we're young (which is apparently this massive problem if you have a mortgage) our incomes are only going to go up.
If you're young and have property you're irresponsible, too young to be in debt, too young to have "that sort of responsibility", etc. If you're young and don't have property you're a Gen-Y delinquent with no work ethic or future. You can't win.
If you're young and have property you're irresponsible, too young to be in debt, too young to have "that sort of responsibility", etc. If you're young and don't have property you're a Gen-Y delinquent with no work ethic or future. You can't win.
Don't care what people say. I've been carrying debt for years. The people who tell you 'you're too young' (especially your peers) are going to be the ones running around like headless chickens in later years when they have kids and have to buy houses. Stick with it and you'll be SO much better off.
Alex
This is EXACTLY what has happened to me. About 5 years ago (when I was 27) we were buying our first PPOR, and by the standards of the time it was a fairly good one. Lot's of my work colleagues and friends were carrying on about how property was too expensive (ha!), and how it would mean I couldn't take overseas holidays, and how I should wait until I had a higher income, and how I was "still so young".
I realised later that all of this crap is simply excuse making on behalf of those people who said it. Now, I have 4 properties, a shares portfolio, and am generally very well off. The people who bagged me are now the ones carrying on that 'property is too expensive and it's really unfair'. These people, I've been told, now whisper behind my back about 'how I suddenly got rich'. Suckers.
Ultimately, if you run with the crowd you will end up like the crowd. Which means you will have plenty of debt, no chance of early retirement, and will be chained to your job because you can't live on a cent less than you currently earn.
Ignore the masses, make smart choices, and in a country like Australia, there's no reason you can't go from nothing to very wealthy in 20 years or less.
I assume you used equity in your PPOR to continue buying good assets? I'm just watching some very good friends buy their Barbie Dream House. They'll never borrow against it, because that's "risky", and the repayments they are looking at will mean 1.5 of them needs to be at work all week.
The key is to divorce the "making money" from the "I need a place to live" problems. They are seperate, and no matter how tempting it is to put them together.. it only confuses things. And a lot of people I know (DINKs around 30) are solving the "somewhere to live" problem without even thinking about the "money for living" problem.
Fine by me though .. their kids will be renting my places for decades to come (and want a Barbie Dream House of their own when they turn 30).
My wife and I are 34 and bought our PPOR a year and a half ago after spending the first years of our marriage travelling and then growing a business. Its our first property and we bought it for $309K (3 bed 2.5 bath plus office and 2LUG detached town house on 350 square meters in Tingalpa QLD) It would be worth more like $450K now with the growth we have seen in Tingalpa over the last couple of years and we owe $280k on the mortgage.
We are looking to buy our first IP at the moment and the only "strategy" we have come up with so far is to buy the cheepest IP we can find so we can keep on buying a few more.
We know nothing about property investment, we dont know what an LVR is or how any of the finance works but we will get out there and buy till we cant get finance anymore because the way we see it we will come out ahead in the end.
We would love to move in to a larger place but I am tryiny my hardest to keep us in this house for now so we can use our income to service the IP debt.
We earn $150K PA between us and the PPOR is in my wifes name but I am on the mortgage. I plan to raise our salary top $170K PA witin the next month to give us further cash flow to invest.
Would we be better off trying to buy trhe first IP in my name seeing as our PPOR is in my wifes name? or will we be better off buying it in both our names?
We are paying $1k per week off on the PPOR at the moment to try to pay it off as fast as possible. Is this putting our money in the worng area? should we just pay teh minimum on the PPOR to give us more cash to invest or should we forget about the IP's and just throw every cent we have into the PPOR. We should be able to up the payments to near on $1500 per week soon which will blow the $280k mortgage over in a few short years but is this really the best way to get teh most benefit from our money?
Everyone says to just go out and buy but pretty much every property I look at seems to be above market value so I am getting pretty frustrated at the moment and just paying off the mortgage as fast as possible seems to be an easy alternative.
Any sugestions?
We are looking to buy our first IP at the moment and the only "strategy" we have come up with so far is to buy the cheepest IP we can find so we can keep on buying a few more.
We know nothing about property investment, we dont know what an LVR is or how any of the finance works but we will get out there and buy till we cant get finance anymore because the way we see it we will come out ahead in the end.
We would love to move in to a larger place but I am tryiny my hardest to keep us in this house for now so we can use our income to service the IP debt.
We earn $150K PA between us and the PPOR is in my wifes name but I am on the mortgage. I plan to raise our salary top $170K PA witin the next month to give us further cash flow to invest.
Would we be better off trying to buy trhe first IP in my name seeing as our PPOR is in my wifes name? or will we be better off buying it in both our names?
We are paying $1k per week off on the PPOR at the moment to try to pay it off as fast as possible. Is this putting our money in the worng area? should we just pay teh minimum on the PPOR to give us more cash to invest or should we forget about the IP's and just throw every cent we have into the PPOR. We should be able to up the payments to near on $1500 per week soon which will blow the $280k mortgage over in a few short years but is this really the best way to get teh most benefit from our money?
Everyone says to just go out and buy but pretty much every property I look at seems to be above market value so I am getting pretty frustrated at the moment and just paying off the mortgage as fast as possible seems to be an easy alternative.
Any sugestions?
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