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Sell unit to reduce house loan in flat market

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Steve | 28 Jun 2013, 08:49 AM Agree 0
Hi, This may be an obvious question to you guys but I can't work out how to measure this being maths challenged. My daughter has an investment unit in Townsville worth (She says) $250,000 with $60,000 left to pay on that loan. It is rented for $285 p/w. She also has just bought with her partner a house in Townsville $500,000 mortgage and $100,000 in an offset account. I have advised her to sell the unit and put her money in the house. They will be renting that out soon too as he is in the army and they're off to Sydney. I'm arguing that in a flat property market with little capital growth if any, debt should be minimised. What do you think?
  • Eos Property | 29 Jun 2013, 10:27 AM Agree 0
    Depends on what they are trying to achieve and a lot depends on what they will live in in Sydney. The answers to these two points will be key to the correct course of action.

    They do need to seek some professional advice - they look like they are not maximising their dollars.

    1. Look at interest only option for the unit. This unit is paying for itself no real dramas there.
    2. Need to look at the redraw they have in their house. If they want to use the redraw funds to buy a place in Sydney then they need to understand any redraw of funds will not be tax deductible as the purpose of the redraw is to buy a house. Need to speak with a savvy accountant and broker to clean this structuring up before they go much further. If the intent is to hang onto the property then an interest only loan is the best option.

    They will need to consider what the Townsville house will rent for and then they can work out what the best way forward is. Certainly debt reduction is an option as per your suggestion but for me they need to look at the whole picture and then determine the best course of action.
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