Ask RiotACT: Looking to re-finance. Advice welcome.

You should be able to afford one third of your total gross income to go servicing debt if you are single. My 2 cents worth: Assume your life circumstances will change drastically during the period of your loans, and consider getting out of units and into free standing houses. It’s the land value that keeps you on the up escalator. Free standing homes never go backwards in Canberra. Not even the GFC and mass PS sackings did much other than flattening for a few years and now it is looking like it will catch up over time anyway.

You can’t afford nearly $500,000 debt on $75,000 income. That is over 6 times you income.
Why would you want to keep the Gunghalin unit for a few more years? The losses are not yet big enough for you?

Sell everything. Take you losses. Wait for the property bubble to burst. We are talking falls in the property market of 30% to 50% before the end of 2017. Buy a property to live after that.

World interest rates are ultimately determined by the US bond market. The market is much bigger than any Reserve Bank. Sooner or later they are going to decide that a 3% yield on a 30 year bond and a 2% yield is not a good return and interest rates will return to normal. Bankers and fund managers don’t care about the damage they do the likes of you.

Aussie Homeloans in Manuka gave me great advice on my investment loans. Highly recommend them. Of course, chatting to them is free.

Can you take a second job, like, cleaning or a weekend bar stint, that will bring in another $200 a week? Put all that second income toward the mortgages and ride out the current downturn. And – maybe light rail will be your friend!

“Investment unit” hahaha. In Gunghalin?. hahahahahaha (sorry, couldn’t help myself)
That’s not sounding like a great terminology for what you have bought.
At least your 10K ahead, smarter than many who only pay interest. Good work.
Thanks to negative gearing your’e ahead. (i.e. taking taxpayer deductions out of everyone else’s pocket for your bad investment)
If you can afford it, hang in there and light rail, or some other unicorn dream, will eventually see you back in the black. Eventually…..
Bottom line, if you can afford your ‘investment’ choices, stick with it, it’s just a matter of time.
Hang in there, if you can make the ends meet.

$1400/month seems a very low amount to be expecting to be repaying each on loans of about $250k.

I think ultra-low interest rates have gone on for so long now that some people are unaware that much higher interest rates are also periodically applicable.

Even though the rent is covering the majority of the repayment amount on the first property, you are also up for rates, land tax and ACTEW bills, not to mention periodic maintenance, exceptional repairs, and risk in the form of vacancy periods.

Your income is not high enough for you to take chances with interest rate variability, so perhaps you have a backup plan of moving back in with mum if things go pear-shaped?
You are signing up for a total liability of half a million $$$.
Interest at 10% would be $50k pa in interest alone. That would leave you with $2k/month for the total cost of bills, rates etc on two properties… as well as your personal living expenses. That is what’s called thin ice indeed….

Your best bet is to get the lowest interest rate possible now, cut up the credit card, live on HomeBrand basics, never go out, and maximise your repayments. 10 years of hard work should get you out of trouble.
Go to a mortgage broker, they can often push through a loan application that a bank may (sensibly) be wary of if you talk to them directly.

If your new unit has more than one bedroom rent out the others. You might need to live a cramped lifestyle for a few years, but if you want financial security, so be it. I rented out spare rooms in my very small house for many years, so I know it’s durable. Bedroom, office, etc, all in one room to free up the others. Do check though how this stands with Land Tax these days. What I have read (and was told by the land tax department a few years ago) is that it doesn’t apply to your main place of living, but best to check.

Yes, by all means see a financial planner, but take things into your own hands too to cover costs. Get a second job even. As others have said, if your tenant leaves you might struggle. So get extra income.

Genie said :

I suggest that if you can afford 2 rental properties that you don’t complain that the ACT Government have flooded the market therefore reducing the value of your property.

IdlePeasant said :

PS: Your unit hasn’t lost value due in market this absurd notion you have of the ACT Government “flooding” the market. Who on earth told you that? They’re still drip feeding the market due to the consequences of lifting the artificial land shortage.

It’s a sentiment I’ve heard from a couple of “property investors” that I find really bothersome.

Since when is it the role or responsibility of the Government to interfere in the housing market to backstop people’s crappy investments?

And it’s not as though it’s the ACT Government building the apartments or subsidising their construction – they’re being built by businesses who are selling them for a profit, which is how market economies work.

Why are you asking here? Have you spoken to a financial adviser? What’s your job security like? You shouldn’t be placing all your bets in the property market, especially when you’ve taken such large sums of money while having a fairly low income. My advise is to forget the south-side unit considering current market conditions. Focus on paying back the Gunghalin place ASAP.

Try and pay off as much of your existing debt before that April 2017 deadline. Interest rates are low at the moment, and the Feds are going to be considerably lifting the rate between now and then. The shitty state (and expected future state) of the Australian economy doens’t justify the current AUD price.

PS: Your unit hasn’t lost value due in market this absurd notion you have of the ACT Government “flooding” the market. Who on earth told you that? They’re still drip feeding the market due to the consequences of lifting the artificial land shortage.

I suggest that if you can afford 2 rental properties that you don’t complain that the ACT Government have flooded the market therefore reducing the value of your property.

I lost more value percentagewise on my car just by driving it off the dealership lot than what you’ve lost in 5 years.