Small PPOR Mortgage - Lifestyle & Investment

Hi, I've been thinking about upgrading my PPOR, but I've changed my mind. The thought of taking out a larger loan doesn't thrill me! I'd need to take out a $250,000 loan.

I have a $200,000 loan on my PPOR and once the sale goes through soon on one of my IP's I'll have just a small ppor mortgage. I'll be making repayments on around $140,000 with $60,000 sitting in my offsett account.

I'll be able to save heaps of money and enjoy a bit of a lifestyle too. I've not been able to go on a holiday in 10 years because I had to make sure I had enough money to cover unexpected expenses. Plus now that I'll just have the one IP once rents start to rise in Perth it wont be so NG. I'm currently getting $290 PW on a $350K loan.

Along with being able to save some money. It'll give me options. I'll be able to enjoy that cruise I've been wanting. My stove in my ppor broke so i'll buy a new one. It'll also give me the opportunity to save hard and build up my offset savings. Later on down the track another option I'd have is to use some of my saved cash for a cash deposit on an IP or upgrade my PPOR if I wanted to. I'd only upgrade my ppor to something modest with a little space at the back too. Nothing too expensive.

Right now though it'll be nice to not have that noose around my neck. I've been eating into my savings this past year keeping up with the NG of my two IP's. Its not a nice feeling. It'll be nice to be able to breathe. To enjoy some things in life, have a balance in life (within reason) as i'm keen to save and also be able to save some cash.

Also if I stick with a small PPOR mortgage it'll mean I can invest more.

Anyone else decide to stick with just a small PPOR for lifestyle reasons/investing reasons.

 

I have no PPOR for lifestyle and investing reasons.

 

Sounds like you've already made the decision

Personally - I'd stick with the smaller place/smaller debt and get on with living.

Cheers

Jamie

 

yeah, you have to some balance in life dont you! Gotta live a little.

It would also mean later on if I wanted to I could work less hours too. If I had a bigger house, with big mortgage it chains you down and your stuck having to work full time for longer. It effects your ability to invest too.

 

It comes down to the law of diminishing returns. If your existing PPOR satisfies all of your needs (ie you don't have three kids on one bedrooms), it is unlikely that upgrading will bring you much more happiness and staying with the lower mortgage sounds like a great strategy.

 

We sold our PPOR a few years ago to put all the capital into development projects so we're renting.

In our situation renting makes more sense than buying for the type of property we are in (provided there isn't growth, which... still feels like there has been in the last 6 months!)

Ultimately it is about living in your means I suppose & making choices about what makes you happy. 10 years without a holiday sounds like it is something you need to do!

 

Its just myself. The only reason I wanted to upgrade was so I could have a bit of a courtyard out back with a garden but that can wait. Theres other more important priorities like financial security, investing, and also for lifestyle balance/work options.

I can always just continue to spend time at parks, beach and hills. It would be nice to have a garden one day though.

 

Yeah you have to live within your means hey. Cant wait for my holiday. I'm hanging out for one!
Yep your right. Do what makes you the happiest. Being able to save and spend some too at this stage in my life would make me happier than having that garden.

Good news is I did some calculations and atm my ppor mortgage repayments including my water, council and strata fees comes to 27% of my fortnightly income. Soon it will be just $15% of my fortnightly income. It gives me options! I'll pretend I'm having to spend 35% of my income on my ppor mortgage and save the difference. Or perhaps save 3/4 of it and spend 1/4 of it.

 

Yep

Have you checked out this blog Mr. Money Mustache

Long story short - it's about spending less on stuff you don't need and living within your means. Investing the rest and retiring early. It's not rocket science - but the vast majority continue to load up on consumer debt and buy crap they don't need.

Cheers

Jamie

 

Ta. I'll check it out.

I'm not even that fussed on retiring early. I don't mind still working in my 60's but I'd like to be able to have the option of working less. Job share 2-3 days per week starting in my early 60's would be a nice goal to aim towards. . I think it's achievable.

 

I just thought of another option!

The other option I have is to move out of my PPOR and turn it back into an IP and because it'll have a smaller mortgage on (due to the sale of my other IP) it means it wont be so negatively geared. It'll be more affordable to hold it. This way I wont have to sell my current PPOR and buy another new IP.

Also Perth rents are set to rise. I read somewhere that 12000 vacancies is a renters market, 6000 vacancies its a landlords market and right now in Perth there are 9000 vacancies. Its a balanced market now.

 

And other option which i think is the best one

I could live in my little unit for another 10 years or so, and save hard, and ride the Perth wave. Sell either my 3x2 IP villa or sell my PPOR in 10 or 15 years time when hopefully both properties have doubled. Then use some of the profit to buy myself another PPOR.

But before 10 years time I think i'd like to buy more IP's. I'll hopefully be in a good position in say maybe a few years or 5 years time to buy an IP again. I just dont want to be struggling when buying another IP. I want to be able to afford to hold onto all 3 properties this time around.

 

Yes I love my PPOR 1 bedroom unit with sunny balcony in the City,i have made it nice by adding white plantation shutters,white french doors ,french tapware ,white walls,pink sofa ,my curtained four post bed with teddy bears.

I could sell up my PPOR and my City IP to buy a 2 or 3 bedroom one in a higher class building ,and at times I think of this,but....it will just be more cleaning and i love being by myself most times I dont need a big apartment anyway,i prefer to have extra IP 'S rather than a large PPOR.

 

Wise move - we lived for 8 months in a 8mx8m garage while our house was being built and it was pleasantly surprising how little you actually need to live comfortably. Everything was contained in that space including a queen and single bed, wardrobes, kitchen, dining table, bathroom with laundry facilities, living area for 2 chunky sofas and a chair ... and we even managed to store the rest of our furniture down one end.

Now that we're in the house, next move will be to downsize again. Not to a garage tho

 

I just thought of another option. I could buy another ppor but just lower my sights on how much to pay. Buy something for the same value as my current ppor.

There would be no courtyard but it would be in the location I'm wanting. It'd also mean I'll have three properties when riding the next Perth wave. Having a small ppor mortgage will mean it won't impact on future investing and that's important.

You can buy between $180-$200k mark. It would also mean I won't have to sell a property to pay down my new ppor loan.

 

It's good to work through all the options - and be realistic

 

Yep. realistic

And not just realistic. It's all about setting priorities. Figuring out what is most important to me in life.

If I bought the ppor with the courtyard that I'm wanting, I could only just afford it but I'd be left with just my ppor and 1 IP as I'd have to sell down an IP to help pay down the ppor mortgage. Then I would find it tougher to get more investments (as I have a large ppor mortgage to service) and also have that balance and enjoy life a bit.

If I bought another small ppor then I'll be able to keep all 3 of my properties and will be able to invest again sooner rather than later... won't impact. I'll also be able to live a little and go on a holiday every now and then and not feel financially stressed.

Yep so I think I've figured out a plan.

 

Just thinking out loud here - but - if you bought the larger PPOR with courtyard - would you be able to rent out one of the rooms (think share house) to get the extra money to cover the extra mortgage payments? Have the bigger PPOR - and get someone else to help you pay for it?

I also know of someone that takes in OS Uni students for the same reason - it helps pay their mortgage. I think there are options if you don't mind sharing your space.

 

Hi thanks for your thoughts. It's good to know of all the options and thanks for bringing this up.

Good idea but Nope not for me. I like my own space. Doesn't suit me but thanks for putting it out there.