Buy a new home where you want to live
QHi, Paul. I am 46 and a single parent with three kids aged 10, 12 and 14. I am not working due to the loss of my job, am on Newstart and have no debts.
Sadly, my parents passed away and I am blessed to be coming into an inheritance of $320,000 and have to move out of their home after caring for them.
I have a mortgage of $260,000 on an old cottage in the Blue Mountains that needs a little work and is worth around $465,000$500,000. It’s tenanted at $400 a week.
Everyone tells me to pay off my mortgage and sell the home and buy another property to live in. Would I be better to sell the Blue Mountains home and get another small mortgage to buy a better house in another area? (I don't want to live in the mountains.)
Or do I keep it for future retirement/ income, as I have next to no superannuation, and pay part of the mortgage down, and then rent for the foreseeable future until I am secure again? Or do I possibly use equity and the inheritance to purchase a cheaper primary residence and keep the property tenanted with a mortgage.
Well, Ash, I often find myself at odds with the views of family, friends and acquaintances when it comes to investment. But here I find myself firmly supportive of what you are being told.
You have given me the key clue I need when you say “I don’t want to live in the mountains”. If you saw yourself living there in the future, hanging onto it makes sense. But the return on the property, after expenses, is not great. The Blue Mountains and other beautiful lifestyle areas have not in the past, and are not likely to in the future, experienced the demand, population increases and hence price growth of properties in area with significant job opportunities, education, infrastructure, entertainment and so on.
So I am with the crowd. Sell and buy where you want to live and work. Clearly, I would want this to be in a growth location, near public transport, schools for the kids and also well located for when jobs return and you can work near home.
Before you do anything, though, get a couple of local agents to give you a realistic valuation. Check out selling and marketing costs. Push your agents to get the best deal in terms of their commission and also the marketing costs.
Also, do remember, capital gains tax may apply if you sell at a profit. This is charged at a discounted rate, and as you will be paying little or no tax, it may have little impact. Take a look at ASIC’s MoneySmart website for information on CGT.