Mortgage from hell

Hey guys,

new to this thread.

Pleasure to speak with you all

Current young investor, I bought a property in Port hedland (mining town) several years back
for 1 mil, and now im stuck in the situation where its worth less then half.

Have been situations where I was thinking on defaulting on the loan, its definitely put financial hardship on myself and young family.

also my parents are a guantour of 300k on that loan, I don't want to jeopardise any of there assets at all.

Have not met up with the bank/lender and discussed my situation.

Please any advice would be helpful.

Thanks,
Nathan

 

You could consider bankrutpcy, but defaulting on your loan would mean your parents would possibly join you.

 

Hey Rolf,

your correct there attached to me at 300k

is there a way I can get them removed as a gurantour or refinanced with another lender if there any tricks out there at all?

I have heard situations where the bank have waived the deficit although don't think they would of had gurantours attached and also I haven't got LMI

Thanks

 

How much is your loan?

 

1.2 million terry

 

And it is worth $500,000?

Gee. both parents give a guarantee?

 

300k is there gurantee, and yep,

is there anyway out, what do you recommend?

 

To refinance you would need to bring the loan down to $400,000. That would mean paying off $800k.

If you parents are well off they could possibly lend you $800k, but that is no solution.

Is their guarantee limited to $300k?

Do you have any other assets?

 

I feel for you but I don't understand. Purchaes for $1m but $1.2m owing..?

 

Why did you enter into a property/loan that would cause financial hardship where you couldn't afford the payments, or was your financial situation fine at that time and it took a change recently? If it has been all the same, maybe the mortgage broker/bank fudged the paperwork so you would get a loan when you really shouldn't have and you might have some grounds for taking action against them.

 

Hi Nathan
So sorry to hear about this. Sounds like you purchased in Port Hedland in the peak

So rent no way covering loans? I know rents also been hammered and oversupply.

I know two people who have several properties in mining towns and they have both negotiated with the bank to achieve a reasonable outcome, third party was involved.

I am not an expert on this so I wont give advice but my understanding is they worked out a plan where they pay xx on the $, credit rating has not been impaired and they did not lose their primary residence. However, they did liquidate on favourable terms, considering what was the alternative. When you know more perhaps you can do better.

Once again I don't know exactly how it works and I guess your situation is further complicated as you have the personal guarantee.

If interested in pursuing further info and see whether you can go down this route/whether it would work for you pm me and I will provide you with contact details.

I am not recommending any particular company and you will need to do your own DD on this

MTR

 

What if the property doubled in value instead of halved? Blaming someone else for your mistakes is a bad way to live. I think the op should seek professional advice and learn from this experience.

 

Reading between the lines, the property was purchased for about $1M, using a family guarantee to avoid paying a deposit and purchase costs. This was likely done in the height of the mining boom (2010-2011). The rental income might have enjoyed a yield upwards of 10% - 15%.

Then the mining boom came to its peak, the companies refused to sign or renew leases and built their own accommodation in camps. The yields collapsed and prices started to tumble shortly afterwards. Today prices and rental income is only a fraction of what it used to be, leaving investors with massive negative equity and cash flow positions.

It's easy to see why people found investment in mining towns so attractive. There's already been massive capital growth. Hundreds of millions of mining investment dollars pouring into the area. Properties that clear $500 or more per week after costs when everything else in the country is cash-flow negative.

 

Maybe the value lifted for a short time and equity was released? If median was $1.2 in 2012, some properties could have conceivably been in the $1.5m ballpark.

When was the property purchased?

 

A trick to remove a guarantor when things don't work out. Wouldn't that be something!

 

What a horrific situation.

Have you sought professional financial and legal advice? Do the parents understand what is happening?

You're going to need some advice that includes your parents and looks at the whole situation overall. Do the sums of rent vs. loan costs. If you sell can you pay off the rest of the loan? Can you get help from the parents to reduce the loan size to make it manageable?

With a loss of $700K, personally that looks like bankruptcy territory to me. Unless the parents are willing to pay off a large chunk of the mortgage and you all hold the property hoping for prices to rise again... which they may never do.

Given it will likely affect your relationship with them significantly, you may need to get some counselling help too...

 

If your parents have a limited guarantee of $300k and you have that amount of equity in the property then they should be able to remove themselves as guarantors, leaving you alone to negotiate an exist strategy with the bank.

That said you need to get a good handle on the terms of the guarantee before anything rash. Get legal advice

 

I don't see how this would be possible. A mortgagee would only release a guarantee if their loan was paid out, or if there was sufficient equity in the security property to maintain an LVR of 80% or less.

They OP should seek legal advice, or the parents should, about whether the guarantee is enforceable. Perhaps it was defective.

 

The rents would have dropped a lot too, if rented at all most likely, OP not Robinson Crusoe.

PS also, do not propgate this cr*p where people do not face and own issues of own making, that is not kosher IMO.