- April 15, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Financial Hardship and Mortgage Struggles
Hi all,
I am the owner of an apartment that holds approximately $150k in equity. Unfortunately, the fixed rate on my mortgage ended a year ago, and since then, my cash flow has been depleting rapidly, making it challenging to afford the monthly repayments.
In an attempt to cover expenses, I resorted to using a credit card with a balance of $5.5k, which has now been maxed out. Currently, I only have around $6k left in my bank account. The ongoing strata fees amount to $1k per quarter, adding to the financial strain. Additionally, the mortgage payments total $2.5k monthly, which consumes half of my net income of $2.5k per fortnight.
I faced a similar financial setback two years ago when I was laid off, prompting me to establish a payment plan with the lender. Upon reaching out to explore the possibility of pausing payments once more, I encountered resistance from the lender. This response left me feeling perplexed, as it seemed unusual for them to display such reluctance or personal investment in denying my request.
My partner, who faces challenges in securing employment due to our location in a small city and her non-local or non-Australian background, further complicates our financial situation. Although renting might offer temporary relief, the thought of accumulating more debt alongside the pressure of homeownership weighs heavily on me.
Considering the dismal rental income potential of our property compared to market standards, the concept of rent vesting appears unfeasible. Despite the potential tax deductions it may offer, the overall financial burden remains significant.
In light of these circumstances, I am left with the dilemma of whether to persevere in my current situation or opt for selling the property. Should the bank be more supportive of my financial struggles, or is it time to make a strategic exit?
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Your partner needs a job- any job- ASAP. Also, $2500 after the mortgage should have been manageable with someone being unemployed with the time to cut costs by cooking from scratch, shopping around for utilities etc.
Yeah you bought too much house to begin with but what’s done is done.
As you’ve probably realised, mortgage repayments at 50% is going to be a hard time. That said, you have $2500 left over each month.
Strata ain killing ya – $1k a quarter is $333 a month. $2166 left over. Groceries should clock in at about $440 a month – you’re down to $1726. Car insurance $100. $1626. If you’re driving to work let’s do $400/month for fuel. $1226 left. And so on.
Hopefully you get the point – it’s rough, but with some control you should be able to manage it.
Edit: Somehow missed that OP has a partner. Food budget doubles to $880. She needs to lower her standards and get literally any job.
Definitely don’t sell. Your mortgage is ~$600 a week, and I imagine about $200 of that is interest.
Could you rent an equivalent place for $200/week, such that you could save $400 per week?
Can you save as fast as property grows, such that you can afford to get back on the ladder?
Note: rent will also go up and up. You’ll most likely be paying $700+/week in two years’ time for a worse property, while having a child in a tarocash suit tell you the oven’s not clean enough.
Won’t a rental set you back a similar amount? your partner needs to get any work, urgently. Are you working full time? Pick up a 6th day temporarily? can you rent out and move in with a parent?
I feel that with the price of housing nowadays you’ll never get back in the market if you leave it now. Cut back on expenses and try to keep going. Perhaps try setting up direct debits and pre pay your bills on a weekly or fortnightly basis. That way you don’t get hit with a heap of huge bills at once.
$2.5k left over after mortgage each month should be heaps, no? Or are there kids?
Have you trimmed everything? Where are you spending?
Please don’t sell. It won’t improve with the rental. Right now focus on getting your partner a job. Next thing is see what you’re spending on and cut back. It’s only temporary and when situation improves you can relax and enjoy life a bit more. Hang in there mate..
This sounds like a budget problem. You seem to have the funds to make it work if you knuckle down and budget better
Sorry but your partner needs to get a job. Literally anything.
Plenty of businesses hire on the spot for house/airbnb cleaning regardless of the size of the city
Just my 5 cents worth here. Between my son and I (and a bit of child support from my ex), we have about $6k coming in a month. I feed, clothe, and school three minor children on top of me and my older son’s expenses. My mortgage is nearly $2100 a month at nearly 8% p.a. I have been paying back council rates at $150 a week all year (arrears from previous years). We have private therapy expenses, and my son has OCD, which means our water bills are excessive. Insurances are all paid, because God forbid anything happen. I try to put a little aside each week in case of emergencies (like the plumber wee need to fix a leak next week). We are struggling, but knowing our budget means we know where we can push and pull a little and move things around to ensure all bills are up to date. It is doable, but it won’t be comfortable.
You will have to include your wife in this, though you need to begin planning your financial future together. She has to understand that taking on a role, any role is more important than looking for the right role. Not just financially, but the longer she is out of work, the more unemployable she will become. Right now, there is a desperate need for disability support workers. Some companies will even pay for the training. Yes, it’s not what she wants, though it is rewarding work in its own way. And it pays the bills. And having a job means that you can both breathe easier while she looks for the perfect job for her.
Good luck !
How much cheaper would the rent be?
Most jobs are word of mouth so find the mouths! What about asking all of your family, friends and work acquaintances for leads.
Could she go on your local FB group and ask for work leads for any sort of work in the meantime eg cafe, babysitting, pet sitting, book keeping etc.Is she involved in the local community? Could she door knock local businesses.
I find it hard to believe that the job market is tight for accountants, given the turnover we have in our company. If it’s tight in your town could there be wfh contract opportunities in larger cities. Maybe contact agencies in bigger places.
Once she is working you’ll be fine.
When you are assessed for a mortgage they take into account rate rises. I’m not sure of the exact percentages they add on top, but it is a little concerning that you can’t afford your repayments when the bank would have taken this into consideration for serviceability. Are you paying your partners expenses too? It sounds like they don’t have employment at the moment.
For the love of God please don’t add a child into the mix right now
Hey I think you’re a little overwhelmed right now but I implore that you take a breather and open up an excel sheet and list down all your expenses line by line. You will have some clarity there.You need to be prepared to be as frugal as you can , at least for the next few months.
2.5k is around 600/week which is pretty good – if you were to move out + a partner you’d likely pay about the same (after including move in cost, furnishing etc). Stretch your time horizon a little longer- if you sell now , you will be paying as much as renting and don’t build equity doing that.
1.List down all your debt and their interest rates. Work on getting rid of the highest ones first. Pay a little extra each month to get rid of them if you can.
2.For anything in (1), work out and negotiate which ones can be deferred or paid back (e.g your extra strata cost) at a later date. Most orgs will be understanding as the COL crisis is affecting everyone (not just you)
3.Try getting rid of unnecessary subscriptions and eating out less if you can.a bit of willpower is needed here.
4. You and your partner should try your best looking for a job/ additional job to cover extra expenses.
5.look to build a little emergency fund so you won’t fall into panic again. $10k is a good goal.
6. Set aside a small amount ($10-$20 a week) for a little reward for following your plan- if you don’t, you’ll get burnout real quickly and won’t stick to it .
The dead weight is your partner not the property.
Can you rent out a room to ease the pressure?
Is the 150k equity capital growth or money youve put in?
Will you have to pay capital gains if you sell?
Were you eligible for a first home buyers stamp duty exemption that you wont have on future purchases?
If you will default on your mortgage then sell. If they take over you will be left with nothing.
Time for your partner to head down to Maccas and he themselves a job
If you are going so negative with no way of bringing it into the black, then eventually your only option is to sell.
The question is whether you sell it now or hope your financial situation improves. The issue is that your partner does not work in any capacity and draining more of your finances.
This means you are going under real quick.
Sometimes to move forward you have to take a step back. Owning a property isn’t a dream when it completely drowns you.
So you do what you need to do for your situation. Forget what others are doing. Capital growth means nothing if you cant service the loans.
If you are selling you have 150k of equity. Good. This step is taking a step backwards.
To move forward:
1. You will need to make sure that 150k does not drop. Park it at Macquarie where it’s paying 4.x percent pa.
2. Pay off your credit card.
3. Your housing – flatmates.com and rent a room. Yes shared kitchen etc and not the best neighbours but it’s a roof over your head.
4. Obviously cut all your discretionary spending out. Unless you want to permanently stay in a rooming house. People share room and sublease all the time, but don’t rent an apartment that just increase your costs.
With what you have coming in, 5k a month. Have a budget for food and rent and save the rest. As after the credit card you have no debt, then you might want to look at investing your money. However investing comes with risks and your capital is never guaranteed.
You cannot save your way to financial freedom. In the old days you can but in today’s day and age it is not possible.
If you are into stocks raiz is a nice service. I put money into a balanced aggressive portfolio and it’s still ETFS and bonds, which is less risky than individual stocks. It gives you options to regularly invest. It automatically reinvest a set amount frequently. You don’t need to get a brokerage account which makes it easier to start. Raiz used to be called acorns money (when in US.)
The above is an example when your head is above the water what you can do to move ahead. But right now you are under, so once you get out of the red (unless your partner gets a job, there is no excuse to not get a job btw.) if your partner contribute financially then see if it gets you into the black, if not the decision to sell is better sooner rather than later before your equity is eroded.
This is a tough situation for you, but provided you take steps to get out of the hole (I see that as pretty straight forward and not doomed), it’s the fastest way out.
All the best.
On a very similar situation, I don’t have a strata but my mortgage is close to 3600. That’s 50% of my salary. I did the following to cut costs – stopped buying coffee outside. I make my own. I make big batches of curries and rice and make chicken etc. on weekend and I carry 2-3 slices of bread and a fruit to office for afternoon munching whenever I go ( 2 days every week). I keep my own butter and jam in the office fridge. It’s been 6 months since I bought a coffee or lunch outside. I make my own. I shop more at Aldi and keep an eye on weekly specials at Cole’s, Woolies and stock up on things when they are cheap. All this have helped me save approx 400 a month. I canceled my Disney + subscription. I still have amazon and Netflix. We got solar 3 years ago and now make a conscious effort to do our laundry and dishwasher etc during day time. That lowered our electricity bill. Times are tough but if you can become better at budgeting than you can hold on to your home. Selling won’t help because you might struggle to save enough for your next home and spend it all.
Time to tighten that belt. Cancel Netflix, gym memberships, buy generic brands, shop in bulk, no more dining out and get that partner working. Cleaning, stacking supermarket shelves, what ever it takes to get some other income!
Start shopping for cheaper insurances, gas and electricity and see what you can sell to get yourself back in a more comfortable setting.
Yes. Simple
Just be mindful that with strata, if anything goes wrong such as water penetration issues etc, your strata could go from $1k a qtr to $5k a qtr. it’s not unusual for this to happen when the building need. To raise funds urgently. Something to think about and prepare for.
We’re not that bad, but we do regret spending what we spent on our current house.
We wished we bought a townhouse we really liked for 40% less than we paid for this house. All our issues would be solved if we did that.
My opinion is look into tight budgeting. Your partner might have to look for any job available within like 30minute drive, go speak to some job agencies and such. Spend some time looking for those jobs instead of 10 minutes a day within just 1 specific field.
Can you refinance & get a reduced rate. Your lender sounds a bit of a dick tbh.
Also is renting it out & renting something cheaper an option so you can negative gear it?
Your partner should be paying you rent too
Your partner needs to go and do whatever work they can. Cafe work. Washing dishes. Anything. They shouldn’t be relying on you and putting you in a position where you have to struggle. A relationship works if it’s all hands on deck.
$2500 a month doesn’t even seem that high?
My monthly mortgage and income is almost exactly the same as yours. Maybe even slightly less. I’m not sure what your expenses are but I somehow manage and I’m not under any stress. It’s probably worth taking an audit of all your expenses.
I really want to know which city OP lives. Can’t even find any job at all. Must be really rural. Ever think about moving to “bigger” city? Easier for your wife to find job.
OP, I came here as student. My parents also upper class. I was working like crazy when I was a student (never worked before in my whole life. Don’t even know how to sweep floor / cook rice). I think your wife also can work whatever job that she can get. It was shocking at first. I cried for the first month after every shift but I got used to it.
No problem with selling your apartment as long as you can buy another one in future. Renting sucks.
Obviously, a lot of people have mentioned that your partner has to get a job. Without being too judgemental but also completely judgemental, it still blows my mind reading posts of people that say their drowning in debt and their significant other doesn’t work. I would work in fast food joints. Hell, I’d do any horrendous unwanted job if it saved my partner from debt and stress. This is what a family unit is supposed to be.
Hang on, if you don’t like mortgage stress, you’re going to hate rental stress.
Your partner needs to find a job, anything at all, Bunnings, Coles, whatever.
Generally speaking, banks will help you out, could you go interest only for a bit?