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Negative Equity - Options

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AndySouth | 07 Apr 2015, 02:51 PM Agree 0
I have 2 rental properties located in northern Adelaide. I purchased the first property with a borrowing of $250K in 2008 and went I/O. I then subdivided this property and built another house, borrowing $200K, also I/O. Due to a number of factors, the properties together are now worth less than I borrowed.

I have gone P&I and am paying $100 extra a month but it is going to take some to get back to a positive position. Unbudgeted costs; tenants moving, repairs etc. are draining the income these properties are producing, putting stress on my monthly cash flow.

I would also like to purchase another property to live in but am finding the banks are limiting what I can borrow due to this above negative position.

What are my options?

  • PeterSun | 02 May 2015, 03:14 AM Agree 0
    Hi Andy!

    That's sad to hear... Most banks really consider your full outstanding potential debt when they’re assessing your borrowing capacity.. Some bad credit listings, if placed on your file without proper adherence to the relevant laws, can be removed from your file. A credit repair specialist can help you in this regard. Removing negative listings form your credit file can see you apply for a regular home loan, avoiding the higher fees and interest rates of a bad credit home loan. In Australia, there are only two major LMI providers, Genworth and QBE. They have their own lending criteria which they use to evaluate your loan, which can in some cases be stricter than that of your lender, leading to your application being rejected. Some lenders don't use these insurers, meaning there's no third party risk of being rejected for a home loan because of LMI. In most cases, these lenders, such as Pepper, will have their own LMI alternative.

    Hope that helps,
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