Bought at the 2021 Peak? Here’s What You Can Do Next | Episode 543
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What can you do if you bought a home near the 2021 property market peak?
We are back in your life. And today we are asking if you bought a property at the peak of the market in 2021 and you feel stuck, what do you do? Michael, we are talking about me today. You're going to give me some personalized
financial advice. Yeah, it's the therapy couch. Let's do it. Personalized advice. Cool.
So we talked about this a little bit the other day in a previous episode. We'll pop the link to that in the show notes if you haven't looked at that one. But essentially, you know, I've got a growing family, my guy. You do. I have more kids. I need more space to be able to hide from them. I bought my house in 2020 for $1.75 million. At the peak of the market, it was apparently worth $2.4 million. That's wild.
Especially because it's like two years after that.
Yeah. Today, it is worth $1.55 million, which means that my equity position is tight, despite the fact that I would like to move. And I feel like this situation is probably not uncommon in the current market. The other thing that makes my situation more complicated is you and I did decide to go and buy some multis. We did. Which means that to be able to have a deposit for those, I probably took on another like $300,000 of debt in my own name. Yeah. To be able to do that. So if I didn't do that, I definitely could move right now. Yeah. So
can you help me? I can. I can help you. It's going to be a
short episode if you could. Yeah.
Yeah.
Yeah, and again, this is one of those things where we're using a case study here as an example, but the numbers basically, you can slide the ratios up and down. They can apply to basically anyone who's in this position because most people, if they bought around the same time as you, are facing a pretty similar issue almost no matter where they bought or no matter kind of what they bought for. Yeah. Yeah, some people will be different. Some people have like, you know, huge equity and massive deposits. But for most people who are buying with like a 20% deposit, just trying to pay down some debt, you can feel pretty stuck.
Can you buy your next home with less than a 20% deposit?
Yeah, I think so for sure. Like if you go over the last six years, somebody that's bought a house, probably heaps of them got married, had kids and gone like, the house I bought right now is not right for my situation moving forward. Yeah.
So what do we do? What do we do? What do we do? So really what we're looking at here is how much deposit do you need to buy the next house? And then how do you actually get from house A to house B? Because you can have enough deposit, but the mechanics of actually like selling and then buying or buying and then selling or contemporaneously settling things can get a little bit confusing. So if we start on the numbers side, I think most people, when they think I'm buying my next house, they think I need a 20% deposit, right? Those lucky first home buyers, they can buy with as little as 5%. But us next home buyers, you know, we're stuck. That's not true. So long as you're buying an owner-occupied property, you can buy with less than a 20% deposit.
Yeah, but you know, you can't have your cake and eat it too. What are the T's and C's on this bad
boy? T's and C's are your interest rate isn't going to be quite as good. And your cashback, like your cash contribution from the bank's not going to be quite as good either. But the cash you can actually negotiate on. So like often we can get it pretty close. Probably won't be the same, but it'd be pretty close to what you get with 20%. It's the interest rate that most people are going to go, oh, I'm now on a penalty interest rate. So you're either on the carded rate at a specific bank or certain banks, or you're on a rate plus a low equity margin if you're at some other banks.
Okay. How much does that end up being?
Yeah. To be honest... It can be a bit. So like if you've got a $1.4 million loan, if you compared it to say like a one-year special rate today versus a one-year carded rate or a one-year carded rate plus an LEM, it's probably going to be just over $200 a week in interest. So that can add up, you know, roughly, yeah, it's usually just over $10,000 a year.
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Chapters
8 chapters
1
What can you do if you bought a home near the 2021 property market peak?
0:00–2:11
2
Can you buy your next home with less than a 20% deposit?
2:11–4:54
3
How do low-equity mortgage margins and lending rules affect your next move?
4:54–12:31
4
How can you sell your current home and use the proceeds to buy another?
12:31–16:22
5
What income do you need to qualify for a low-equity home loan?
16:22–18:13
6
Can you make an offer on a new home while your current home is still for sale?
18:13–19:24
7
When does staying in your current home make more sense than moving?
19:24–20:04
8
Who should you speak to before selling your home and buying another?
20:04–21:00
Speakers
1 identifiedMore from Cheques and Balances
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