mount warren park unit gone down in price?

[arriety]

Is this possible for my friends to have been given this advice?

They purchased an investment unit 4 years ago for $205K and put $20K deopist and had to pay mortgage insurance. The unit is upstairs in block of 8 and they had no problems renting, no major repairs, no troubles etc. Renting currently at $245 per week.
They purchased it on 5 years interest free because that was all the bank would give them. They have 195K owing.

Now they are being told by their financial advisor that their unit has decreased in value to about $160K and if they refinanced they would be looking at 8K mortgage insurance. So they are better off leaving it as is and paying Principle and interest. They both have good jobs earning about $70K each and dont have any other property as they rent a modest house in Brisbane (about $400 a week rent). they would like to look at purchasing another property but with the amount their monthly payment will increase shortly and they dont' have any equity. They'd like to sell as they feel investing has been a waste of time and when they start paying principle and interest they will find it a drain on their finances.

I think they could get $208K refinance including the insurance and maybe get 5% interest free loan. They would still be positively geared and they could wait hope the house prices rise this year. What do you think?

 

[Propertunity]

Is this possible for my friends to have been given this advice?

Anything is possible I suppose.

They purchased it on 5 years interest free because that was all the bank would give them.

I think you mean Interest Only. (no lender offeres interest free)

Now they are being told by their financial advisor that their unit has decreased in value to about $160K

Financial advisors are not valuers. They need a registered valuer to get a proper valuation. It may of course be the case, that their unit has fallen in value. That is the nature of property.

they would like to look at purchasing another property but with the amount their monthly payment will increase shortly and they dont' have any equity.

They will need equity or cash savings to go again, otherwise they have to wait.

They'd like to sell as they feel investing has been a waste of time

Then they can join the ranks of 80% of people who buy 1 property (yes, 1 only) and sell within 5 years. This behavior is not a way to create wealth.

and when they start paying principle and interest they will find it a drain on their finances.

They should have planned for the extra principle payments after 5 years OR they may be able to renegotiate an additional 5 yr IO period.

I think they could get $208K refinance including the insurance and maybe get 5% interest free loan.

IO not interest free

They would still be positively geared and they could wait hope the house prices rise this year. What do you think?

I think:
1. Hope is not a strategy
2. They probably purchased in a low CG suburb??
3. They need to wait for a full real estate cycle of 7-12 years
4. They need to relax and let time do its work. 4 years is too short.

 

[saiman]

pretty much everywhere in SEQ has decreased in price since the peak in 09

makes for good buying opportunities

 

[Rolf Latham]

4. They need to relax and let time do its work. 4 years is too short.

I reckon thats the core issue here

ta
rolf

 

[arriety]

But are they likely to get refinancing for the full amount of at loan at yes (correct) Interest-only loan or will they be forced to take the principle and interest loan? ( I was multitasking as I was writing and reading about an Ikea interest-free kitchen - hence the error. LOL)

Should they take the risk to get it valued if it is likely to come in very low. I am surprised that SEQ is gone down that much. There must be lots of bargains out there.

 

[starter]

What's the risk of getting it valued? It's a couple of hundred, some broker will even do it for free.

 

[arriety]

What's the risk of getting it valued? It's a couple of hundred, some broker will even do it for free.

I agree. I think they are worried that if their bank does the valuation, they will be stuck with the higher LVR and not be able to refinance - I would advise them to go through a broker.