A young married couple who have the following scenario;
• 1 x owner occupied property valued at $400,000 owe $365,000
• 1 x investment property valued at $385,000 owe $140,000
• 2 x vehicle loans totalling $30,000
• 3 x Credit cards total owing $20,000
• Renovations to owner occupied property required of $30,000
• Personal loan of $25,000
• Personal debt of $10,000 owed to a family member
• Total debts of $620,000
• 2 x property’s valued at $785,000
• LVR (loan to value ratio after debt consolidation) 79%
They were struggling to meet their monthly commitments and needed to have their cash flow addressed as well as lower the overall repayments on both properties and consolidate the vehicle loans, credit cards, personal loan and to carry out urgent renovations as well as repay a family member the outstanding debt. Renovations and repairs where required to the owner occupied property as well.
Both home loans where refinanced from an interest rate of 5.8% to a loan with a rate of 5.3% interest only for 5 years. Credit cards (20%), vehicle loans (12%), and personal loan (15%). $40,000 in cash was accessed in order to repay the family member ($10,000) and conduct necessary renovations to their owner occupied property ($30,000). *Rates quoted are from June 2013.
This debt was therefore “good debt” or tax deductible debt as it was borrowed for an investment property and saved them utilising the $60,000 cash. As a bonus they had $61,000 left in the kitty that they are know intending to use for the next investment property purchase.I also renegotiated the existing loans with their current bank adding further value and savings to them as well as attaining a better rate on the new property purchase with the other bank than what they would have received by going directly to a branch.