Advice on our next move

HI all,

I am interested in any input / opinions you can offer on our current situation to help my husband and I plan our next move.

We have recently moved from Brisbane to the Gold Coast. This was for a lifestyle change primarily, and definitely not to save money because it is costing us an extra $100/200 per week. That being said, we love it and plan on staying.

We own two houses. One was our PPOR in Mt Gravatt Brisbane valued in Nov at about 630k. The second is an IP in Scarborough worth about 475k. We are renting down the coast for 12 months. Our loan structure is as follows:
4 Interest only loans:
360k for property in Scarborough with 130k loan against Mt Gravatt house
60k (against offset acc) & 250k for property in Mt Gravatt.
All loans are around the 4.8% and interest only.

Our combined taxable income is about 130k, however I have been self employed for 12months, so won't have enough financials I'm assuming until same time next year.

My husband is so keen to buy as soon as we can on the coast, and prices have been going a little nuts in this neck of the woods. He would be happy to sell our Mt Gravatt house so that we don't put ourselves under too much pressure, but I'd like to do everything possible to keep it. I think our best bet is to wait until same time next year (until I have been in business for 2 years), see how much equity we have in our Mt Gravatt home and if all is going well, draw down again for our next PPOR. He is a carpenter and we are always better off buying houses we can improve.

Any extra questions and thoughts/ opinions welcome!

Thanks

 

Thanks Rolf, yes, that's what I'm thinking... Equity good, servicability might hold us back (2 young kids as well). I'm not sure whether banks are reluctant to lend 80% to self employed. It may be a decision between selling Mt Gravatt to improve our position or renting for an extra 12 months and hoping for the best.

 

There's generally no drama in getting higher LVR loans for self employed - its more the length of time in your self employed role that will create the issue in obtaining a higher LVR loan. Also you'll be restricted to a very narrow lender pool without the 2 year ABN history.

Without knowing the numbers and testing what you need to do - selling/renting would assist with servicing.

Perhaps have a chat to Rolf (based in GC) and run through it all - you'll have a better idea of where you stand and what decisions you need to make to make a future PPOR purchase work.

Given the potential market dynamics of your PPOR - you could potentially benefit from holding onto the place until your ready to finance the new purchase.

Cheers,
Redom

 

Make sure you let your tax guy know you're looking to borrow in the near future - this is really important, especially if servicing is tight. You'll need him to minimize your deductions rather than maximise to help boost your taxable income.

 

Drop Rolf a line to go through it in detail @Lib04.

My gut feel is holding on the UMG will be ideal. Lots of investors are buying there at the moment with the view of achieving pretty good capital growth over the next while.

Jess made a good point too. The higher your taxable income this financial year, the better (from a borrowing capacity point of view).

 

12 months isn't a huge issue at that LVR position.

What will your income look like over the next 12-24 months? If its going to dramatically increase then a couple of lenders (ANZ being the best in this space) can consider cash-flow lending.

Rate will be around 5.60% though.

This is assuming that more vanilla and out of the box solutions are not possible.

 

Thank you everyone.

Thanks for making the point about deductions @Jess Peletier . That was something I was concerned about. I was under the impression that many banks will allow me to add back one off expenses (especially with the 20k immediate deduction avail at the moment to small businesses) but I will definitely run this by my accountant.
@Steven Ryan , my thoughts exactly. We've had a great year in Mt Gravatt already, and am hoping for another good increase over the next 12 months. Both properties are renting well so cashflow really isn't too bad. I would expect our income to be another 10-15k higher next financial year.
I know it's probably very complicated, but is there a general rule banks use when looking at income : loan repayment ratios ? I know things like dependents etc can factor in...

Rolf, is it worth catching up with you soon to help develop a plan for next year, or should I get in contact then?

 

There's a bit too much involved to give you much of an idea. Well worth chatting to @Rolf Latham now to see where you stand and line up your ducks