Would anyone refinance our loans?

[KeeponGoing]

Hi. This is a question for all the brokers, just wondering if anyone can help us.
We have 2 properties valued at 650k each and we owe 587k and 575k on each one.
We rent both and earn $45500 each per year. Costs involved are $7500 pa, so we net $38000 each house per year.
We earn 75k gross (1 fulltime permanent and 1 part time casual wage) and have substantial depreciation, so don't pay very much tax.
We rent our residence at $330 per week.
We also have 29k visa.
We have only just been able to set everything up this way, as we were previously unemployed for a while and got behind with mortgage repayments. We haven't paid our mortgages on both properties for 6 months.
Is there any way we can refinance and start afresh with another lender?
Thankyou
KeeponGoing

 

[Rolf Latham]

Hi KOG

If you are currently 6 mths in arrears it will take at least 6 mths before someone may look at this for you.

Your loan to value ratio may also make it tough.

As a first step, id do a cashflow analysis, as to see of you arent better off selling one or both properties

ta
rolf

 

[Aaron_C]

Hmm that seems tough with those LVRs...Trying to get you out of it would incur some more LMI which may set you back even further. Would require a full assessment to be sure though.

 

[Sunfish]

With the benefit of 20X20 hindsight it is clear you would be way better off if you had simply bought a PPOR and lived in it.

Here and now, if what you are doing isn't working, swallow your pride, salvage what you can from the wreck and get out. The sooner you take that loss, the better. You will learn from the experience.

 

[kathryn d]

Keepongoing,
How much do you spend a week on groceries?

 

[BMan]

how is refinancing going to help you out?

i dont get it correct me if im wrong
your netting 76k a year from your 2 houses, 38k x2
also earn 75k gross (assume 50k net)
pay 330/week in rent = 17160/year
and have 29k of debt in visa? @20% = 5800/year interest




38000+38000+50000 = 126000
126000 - 17160 = 108840
108840 - 29000 - 5800 = 74040


so as far as i see it you have just paid off your credit card and interest in one year and still have 74k for living expenses minus taxes etc
im guessing its not that easy so im assuming you havent stated the interest cost of the loans... as surely they would be more than 7500pa

use rent income from houses to pay visa debt asap

 

[kathryn d]

38k+38k=50K=126,000
126,000-17160=108840
108840-69720 (pa for mortgages @ 6%)=39,120
that is $752 a week to live and repay visa


Plenty
No need to refinance

 

[BMan]

what she said ^

 

[Ajax]

I don't know about refinancing.

However the gross yields (7%) and net yield of about 5.8% per property are good returns particularly if variable interest rates fall a few mor times-interest rate futures say RBA cash rate to hit 3.25% by September 2012 ( a decrease of 1% from current levels).

If you are paying about 5.5% variable interest at this time things will be noticeably easier.

I'd pay down the 6 month mortagage arrears first then the highest debt (credit card) asap. 29k on credit cards is too high...and far too high a limit.

As you have substantial exposure to property (gross value $1.3m) even the slightest capital gain (say 3% which is 39k) will make your balance sheet look better. If Terry Ryder's predictions come true and property prices increase later this year your overall plan will look good.

However if property prices were to fall by 10% you are looking at negative equity (if you include the credit card debt).

 

[Mick C]

I would say it would be tough, and even if a lender is willing to accept the refinance it be a non-conforming lender with a higher rate ( which i presume defeats the purpose of what you want to do anyway)

1. your 6 month in arrears
2. 90% LVR loans - LMi is payable again
3. LMI is not going to accept the arrears
4. Your credit file is most likely in a bad shape


What's the reason for the refinance?
Sometimes a simple re-negotiation with current lender ( change of product, structure, repayment etc..) will do the trick

Regards
Michael