Healthy LVR and debt reduction strategies for the future

Hi,

With all the talk of APRA, the possible changes and difficulty extending IO and pending interest rate rises I would like to talk about strategies that would be used now to prepare for the best.

I myself am in a high LVR and would like to get this down in the next 2-3 years.

What is meant by debt reduction strategy? Is that reducing non-deductible debt like credit cards, personal loans etc?

Also what would be a safe LVR I should be aiming for. I know a lot of PC'ers are at 50% which is great but what would be risky and what would be the aim in the next 2-3 years. I would love to aim to get to 70% LVR in this timeframe.

 

If your goal is to get to 70% LVR in 3 years the process is pretty simple:
1 look at your current LVR and net income,
2 run current scenario forward 3 Years into the future
3 make any adjustment for expected capital gains achieved in that time,
4 calculate new LVR
5 calculate $ difference between that LVR and your 70% goal. That is how much cash you will need to generate in the next 3 years to reach your goal

Harder part - how to generate that additional income...? PAYE? Shares? Business? Reno/develop? Sell down? There are infinite possibilities. Just need to figure out what suits your skills/risk appetite etc.

 

aiming for 50% lvr for ppor or entire portfolio?

 

It would be entire portfolio. I don't think I will get to 50% thats a lot of money!

But would like to get closer to 70% as reading the forum with everyone giving hints of what to do. I guess am looking for strategies to protect myself and to be able to hold long term.

 

Just focus on paying down the non-deductible debt asap and preparing for the point when all of your loans will become PI.

 

Really have no idea about this stuff. What are we preparing for? That we will be able to cover the additional repayments? Just fixed all ip loans for 3 years, with IO periods extended till 2022.

PPOR should be 80% owned, only small mortgage say 300k.

Hoping this will be enough.

 

Depends on your outlook - did you see 60min last sunday? Preppers storing food, bomb proof homes 14 floors underground.

you might not need to plan that far, but just work out what your repayments on the loans will be in 2022 based on PI on the remaining loan term - maybe at 7% pa too and see how that would effect you.

 

I do agree it is all about outlook but wanting to be investing for the long term means making sure everything is ready and double checking everything.

Thanks for the replies