- October 9, 2023
- Posted by: legaleseblogger
- Category: Related News
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Asking for my sister’s financial situation and potential solutions
Introduction
I am seeking advice on behalf of my sister, who is currently facing a dilemma regarding her financial situation. At 32 years old, she is single, has no children, and works as a registered nurse, which provides her with a decent income. However, she has made little progress in paying off her mortgage and has been contemplating selling her house in Toowoomba, Queensland, to pursue her dream of living near the beach on the Sunshine Coast. With the increasing housing prices and her limited assets, she is concerned about the feasibility of buying a new property in either location and fears that she may end up being a lifelong renter. Consequently, I am seeking guidance on the best course of action for her.
Current Situation
My sister purchased her house six years ago for $275k, but due to making interest-only payments, her mortgage amount still stands at around $250k. Recently, a real estate agent estimated the current value of the house at $450k. Additionally, she had a car loan for which she paid off the remaining $30k amount.
Assets and Expenses
Apart from the house and a car, my sister does not have any other major assets or investments. I am unsure of her spending habits, but I believe she should have focused more on paying off her mortgage instead of making minimal payments. By neglecting this, she has limited her financial flexibility and left herself in a less secure position.
Considering a Move
Feeling dissatisfied with her current residence and neighbors, my sister is contemplating selling her house to move to the Sunshine Coast, where she dreams of living near the beach. While she expects to make a profit from the sale, she is concerned about acquiring an even larger mortgage due to the significant rise in housing prices. She plans to rent a place temporarily and then decide whether to purchase a new property in the future.
Potential Challenges
Considering her financial circumstances, it may prove rather challenging for her to afford a new property on the Sunshine Coast or even stay in Toowoomba. If she delays her decision for another year or two, the situation could become even more difficult.
Seeking Advice
I would greatly appreciate any guidance on the best course of action for my sister in this complex situation. In my view, it would be wise for her to stay in her current house and prioritize paying off the mortgage as quickly as possible. Affording a property in either location seems increasingly unlikely, especially as time goes on. By diligently addressing her mortgage, she can improve her financial stability and explore more options in the future.
AI Legalese Decoder
Considering the complexity of my sister’s situation, an AI Legalese Decoder could prove invaluable in navigating the legal aspects of selling a property, acquiring a new mortgage, and exploring rental options. By utilizing this advanced technology tool, the often intimidating legal jargon can be simplified and explained in a more accessible manner, allowing my sister to make informed decisions confidently. The AI Legalese Decoder can help her comprehend and assess various agreements, contracts, and terms associated with her financial matters, ensuring that she understands the implications of her choices and avoids potential pitfalls. With this tool at her disposal, my sister can make well-informed decisions that align with her goals and financial capabilities.
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****** just grabbed a
If the house is worth so much then she has equity even if she still has a $250k loan.
Why doesnÔÇÖt she rent it out and rent in Brisbane? What if she goes to Brisbane and doesnÔÇÖt like it? At least she has somewhere to come back to.
If she sells, she will likely be priced out of the market.
I know of some people who did this a few years ago (just before property went nuts) they had a house. Wanted a bigger house. Decided to sell and rent to save. Within months they were priced out of the market.
She does need to be better with her money and actually make extra payments.
Probably best to keep it and rent it out while she works out where she wants to live and work.
No way you would even be able to rent somewhere on the Sunshine coast for the same price as her mortgage.
As an RN she could easily find work in Sunshine Coast, so I think if I were her I’d try and rent on the Sunshine coast and rent her house out for 6-12 months. Selling and buying again is a lot until she knows for sure that’s the place she’s going to be happy living for a few years at least.
Selling is expensive and will get her out of the property market but that doesn’t mean it’s not the best option for her. If she is meeting her repayments she is probably best to stay put. Over time her income will increase and she can increase her repayments or perhaps she could rent a room out? As property prices increase so will her equity.
But, as you say, she no longer wants to live there. She will need to look at sale price less sale fees. Buying a new place including stamp duty, conveyancing costs, bank and other admin fees etc. If she can sell, downsize into something she’s happy with and still only service the new mortgage that’s fine. She will be happier and perhaps just paying the minimum amount for the life of the loan suits her goals.
I would only sell a property if I would never want to own one again in the future.
Terrible idea.
Friend of mine did that with the intention to take the extra money he’s made from selling the house he bought 7 years ago to buy a house closer to the city.
Took him close to 6 months to find one he liked and he got out bided. He didn’t plan for that to happened and that was a year ago.. he’s now renting and it’s eating into his “house money”
Property prices have exploded and the only way for him to buy now is back where he was – which means he’ll have to pay stamp duty again.
She can rent out the house for up to six years whilst renting elsewhere and still retain the tax benefits of a PPOR. That would be the obvious move.
Whilst the current government is increasing the population by 500k+/year in net immigration alone, selling seems like a really bad idea if it can be avoided.
If we enter into a mild recession or just general drop in inflation and undergo rate cuts, whilst the current immigration rates stay the same, housing prices could jump 50%+, and rents could also increase by 50-100%. Rent prices on new listings already jumped 24% in the year ending February.
This question has been asked many times here. Not once has anyone said that it’s a good idea, and for good reason.
Trying to time the market is very difficult, who knows what will happen with the housing market over the next couple of years. Your sister will be able to get work no problem so why doesnÔÇÖt she just rent her house out, move to the Sunshine Coast and rent while she decides where she wants to live in the longer term. Paying interest only was definitely not the smartest move and not appearing to have any savings or investments means sheÔÇÖs not very organised with her money. One example is as soon after as she paid off her car loan she could have set up that same amount to now go to a savings account, it would be a start.
House prices on the Sunny Coast are extremely high and unlikely to improve anytime soon.Rental properties are hard to find and rent is prohibitively high.ItÔÇÖs a nice place to live but probably only if youÔÇÖve recently sold a home in a major city,I suspect.
Opportunity cost of holding cash instead of a house is huge I wouldn’t do it, keep the house until you find a new place.
With some exceptions, getting off the property market makes it so much harder to get back in – I would suggest holding the house until she is ready to purchase a new one at the very least.
Your sister can almost certainly turn the Toowoomba house into a cash-positive investment property, claim tax deductions on the interest and other investment property related item.
Then she would have the freedom to move to the Sunshine Coast and rent for a bit, find out how she likes the region and then make a call to sell up. Or, (and this would be my preference) use the equity in the Toowoomba house to start a second mortgage on the coast. She pays off house 2 while the tenant pays off house 1
Beg her not to sell. She won’t be able to get back in.
The house equity is not all “profit”. Inflation has also made cash devalued. Think of it as what you could buy with $100 6 years ago vs. what you can buy with $100 today. Get her to check her financial health. If she doesn’t know where her income is going, chances are she will blow through the profit she thinks she has. Real estate people can sometimes be the scum of the earth. They use the most basic vice of greed to try and convince people to sell. The only winner here would be the agent who told her about her house value to make a quick buck.
Just get her to rent it out, bonus if sheÔÇÖs a nice person as the housing crisis is absolutely atrocious in Tba and the more houses available to rent there the better.
Should just rent it out and then move to the coast, use the 200 K gain to buy a new place there. Rent the current one out.
But most of all, and this is for you as well. She should do what makes her happy… no matter the cost or your thoughts on it.
She should hang onto that house. Selling would be a big mistake. She won’t afford a place at Sunshine coast even if she decides to stay there.
She could rent out the Toowoomba house & yes. She needs to actually get the mortgage down a bit. Even to 100K. Don’t know how shes been able to be on interest only for so long when it’s her PPOR??? Seems odd.
But selling it would be BIG mistake.
If she’s in a rut she can move around without selling. Plenty of jobs for nurses everywhere ƒæì i would encourage her to get out and move around, travel and enjoy life. All can be done without selling her house.
If she doesn’t have much savings currently? She could put head down and save madly for next 6 months. So she can take off! The world is her Oyster.
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I would absolutely encourage her to see what her job prospects are like on the sunshine coast. I know RN jobs up there are scarce due to many wanting yo do the same.
Yeah I’d be keeping the house, she won’t be able to get a foot back in the door again with the rate houses are going up. I’d rent it out, then mayb rent a place in Queensland
Last time I checked Toowoomba was no where near the beach.
My dad told me when I was a little boy ” son , always buy and sell in the same market ”
The reason being if prices go up after you sell you could be stuffed. If they go down so be it.
Rent the house in Toowoomba ( no capitol gains tax ) and sell when she’s ready to buy again if that’s possible.
She should definitely keep it and rent it out, and move to rent where she wants to live.
She should keep the house, move out and rent where she wants to live and turn her home into an investment property.
If she doesn’t like where she’s moved to then she had a home to go back to. She can up the repayments or not – the interest will become a cost of ownership of an income providing asset, so she can at least claim them and maintenance costs.
Making a big financial decision based on “I feel…” is usually not a great idea, espy when she has the option to just not sell it
She will struggle to get even an apartment at that price sadly. Coast is nuts atm and rent is insane. Ideally rent in Brisbane and or might have to house share. IÔÇÖd look further north like Hervey Bay etc as itÔÇÖs quieter and easier to get into market. Lots of RN jobs too.
She needs some expert option like an accountant/financial advisor which IÔÇÖm not. Insert disclaimer here.
SheÔÇÖs in a great position to firstly refinance it, draw something out if she needs it, then rent it out. The interest will then become dex deductible along with rates and a depreciation schedule giving her a massive tax refund in the future.
Meanwhile she rents in sunny coast or wherever she wants to try living. She has a great investment/tax deduction, and more importantly a back up plan if she wants to return.
Rent it out for a few years and see where she wants to put her roots down
House prices going up isn’t useful unless your debt recycling or doing something fancy with the equity
Otherwise, house price going = high council rates, larger stamp duty, higher repayments
In her situation, her house prices going up is going to hurt her not help her
ThereÔÇÖs a new development on the Gold Coast that has three towers.
One tower is a hotel, the other two are residential.
The developers have sold some of the first residential tower, and none of the second residential tower.
None of the apartments in the second tower are for sale. Zero. Nada. 0.
ThatÔÇÖs an indicator.
she could rent vest. Given her principal is relatively low maybe the rental could cover enough of the mortgage.
she can then find a rental in the sunshine coast.