In a dire situation - Mining town collapse

What is the point in borrowing if you are going to struggle to pay back or save deposit?

The interest on $420,000 at 4.5% p.a. is $18,900 p.a. or $363.46 pw without any income to offset. This is a huge amount for a person to pay back and this isn't paying back any capital.

If you were to think of it as paying back a P&I loan at 4.5% for 7 years unless you are able to pay back more than $70,000 a year (almost 75k for 6% interest) or about $1,350 (after tax) you would only be squared compared to compared to bankruptcy. So to then get a deposit in 5 years time for a 500k home at 20% LVR or 100k you would need $100,000 p.a after tax or unless the mining boom comes back but I sure as hell cannot do that.

So I am sorry but if you are not going bankrupt you would likely not be buying a PPOR until you are 50+ by trying to 'pay back'.

Have a go and plug the numbers in;
Home Loan Calculators - Principal and Interest, Interest Only Calculator

My grandparents went bankrupt (when I was very young, like 2) and I am guessing they would of been about 50-55 at the time but they have bought and fully paid off their PPOR fully in Brisbane and also bought a farm outside of Brisbane and started growing olive trees but had to sell it due to their age and none of us grandkids were going to run it (bit hard from Melbourne). So it isn't the end of the world but from the information you have present I would be seriously considering declaring bankrupt but I am no financial planner and isn't my life.

Best of luck

 

Thanks everyone. Really appreciate your views/advice.

Seems like I have a lot to think about over the next coming few weeks. I think at the end of the day I will be going bankrupt but was trying to find another way. If there isn't then bankruptcy it will have to be. Pulling the trigger will be the hardest part but I don't want to wait for the bank/LMI to do it. That could take months/years.

I would love to one day build my own home. I know bankruptcy affects people in certain professions but does anyone know if 'owner builder' is one of those professions?

 

Based on what has been written the best thing might be to declare bankruptcy in the meantime try and get some cash put away and start saving after declaring bankruptcy maybe you need to buy a little safe to keep your cash hidden

 

Even if you have A1 credit the banks still don't want to know you if you're an owner builder.

 

Not sure if you will find the answer to this here on the forum, I would probably consult you local office.

Guessing here;
Owner-builder application

 

It shouldn't.

 

With all due respect, the last thing you should be thinking of is an owner build. Any guess why the banks hate them??
You are learning a massive lesson here, once this clears I would be playing the rest of my financial life very very conservatively.

 

Not sure for an OB but as a builder, it may preclude them form holding a licence (I can't recall if there's a question on the renewal form) but it will be in the Home Building Act 1989.

 

It's not something I'd be doing tomorrow, just thinking ahead. Trying to think of all the obstacles that being bankrupt will hinder my future plans.

 

I doubt a bankruptcy will hinder an owner builder lend anymore than it would for any other type of loan. Owner-builder LVRs are around 60%, lenders do not like them. You'd probably notice an increase in all your insurance premiums post-bankruptcy though.

If you're serious about understanding all of the future impacts, you need to go and speak to a specialist lawyer that deals in bankruptcy. Please get some proper advice so you can make a good/informed decision.

I feel bad for you, and can't imagine what you're feeling right now but I know that if you drag it out, it will eat you up. The sooner you decide and act, the better you'll start to feel. Expensive lesson, but you've got the PC crowd here to help you dust off and start again!

 

Not the end of the world, own up to your mistake make sure you can learn from this and get up again

be more careful next time with risk management and plan for the worst and hope for the best.

Investing is not gun ho easy way to get rich, to get wealthy and keep it and survive the downturn and hard time you have to though out carefully about your risk and capital management and plan for the worst.

What happens to you I would call it a black swan event, low probability but high impact event and it wipes you out. History is full of it but people tend to forget after about 10 years of a good time, we have 25 years of a good time.

Take comfort that you are not the first and last person to be hit by the black swan event
so learn well and may your next venture be a better one.

 

Agree with this.
We high-risk lovers don't even realise how close to the edge we come. Always a good idea to find a level of conservatism we can live with and listen carefully to the less daring types (while learning to read the signposts for ourselves).

 

I suggest you try to contact some of other posters on the forum with similar issues. It would be good to share tips and ideas

 

If all you have is the Newman house, I would put it to the bank that you are no longer paying the mortgage and let them deal with the fall out. They will then need to either take legal action to retake possession of the property or negotiate with you to have the property sold.

They will want to recover the shortfall. It is at this time that you negotiate. If they want to bankrupt you you give them nothing and go through the bankruptcy, if in the alternative they are happy to be reasonable offer them a nominal amount in full and final satisfaction of their debt on the basis that they do not bankrupt you.

It sounds as though your situation is so dire that the problem has become that of the lender. If you seek to negotiate before they foreclose they will continue bleeding you for more, cut them loose and make them chase you.

 

It will probably take the bank 6 to 12 months before they actually start doing anything.

 

I suppose the question is whether to brankrupt or not?

From game theory, I believe you should not make any payments even the bank lowers ur required mort repayments, in case u bankrupt then ur extra efforts to repay is worthless, in case do don't, u still have extra cash to negotiate

 

Just having a look at Newman prices at present, median is now around $150,000

 

Also consider the relevant limitations act for the matter. The lender's debt will become unenforeable after a certain period of non-payment. This may be 6 years or 12 years depending on the state.
Legal Tip 86: Loans and limitations of enforcement https://propertychat.com.au/communi...86-loans-and-limitations-of-enforcement.4694/

 

the other big difference is many people assume property cant go down, (I was one of them afew years ago)

also, with the casino, if you put it all on red and lost it all, its not surprising,

but if you told someone a house would be worth 50% less years down the track, they wouldnt believe you

 

Sorry but if a house is 700k in Newman when at the same time a house in Melbourne is 500k there is only one way the Newman house is going which it did.

It is like going to the casino and putting it all on red but they have changed the table and made 90% of the squares black.. it was a poor decision or gamble which resulted in a loss and should of hedge the bets on black (Syd, Melb).

Could be easier said in hindsight but you need to compare stocks and determine which are good 'bets'. Like is Sydney a good bet now? I doubt it but if Sydney was 4M median and Melb was 1M median there is only two possible outcomes;

Sydney down or Melbourne increases (or a mixture). This is the what happened recently with Sydney growing to much that the yields were stuff so investors went south now Melbourne yields are getting really bad so they will be looking elsewhere and the next largest city is Brisbane which I feel is starting to pick up already in the last couple of months.