2 houses 2 bonds

[miracleboy]

7 months ago I purchased a second house for R1.3 million with repayments of R14200. I still have my first with a bond left of R115k with bond repayments of R3300. House 1 is rented out via agent for R7500.

What im currently doing is using the entire rent for bond and rates on both houses and electricity on new house and dogfood. Nothing left.

Cutting as much debt as I can(prepaid cell and cheapest fibre and insurance) I need R20k each month. Wages after deductions is R5090 so each month I have just just enough except for months like now where there are 5 Fridays so I kinda get an extra 5k.

Wife has a car installment and fone and a loan (for transfer costs) which leaves her with R4900.

We use R1000 per week for groceries and the remainder for occasional fast food and doctor or such stuff.
It's at a point where I can't maintain my current house and if something happens to first house that landlord must fix im screwed.
My questions...

1: Sell 1st house (agent said R800k with minimal work) settle that bond then take 100k and fix up new house and dumb 500+k on 1.3mill bond which would reduce installment?

2: I initially qualified for 1.5mill... see if I can get 150k (if I can) settle first house. Now my current bond will increase by R2000 to 16k. But the R7500 rent is now clean and dump 5k plus my current premium which would equal R19k on bond and have 2+k extra for maintenance?

3: Plod along..both of us getting increase in June and next year rates dropping so then breath room. So basically struggle for a year.

4: Any other option?

In an ideal world I'd like to keep 1st house as a kinda nest egg for when we retire but I don't know. And it's all long term plans and neither teachers or parents taught us bout this so very scared of making droog!

Any help would be appreciated!!

 

[lburms]

@miracleboy My brother you were in no position to buy a second house. You've overcommited yourself financialy and border line have a scenario where of someone defaults for 3 months on the rent on house one ( a real possibility) this house of cards comes falling down.
Sell house one invest the proceeds, first get your ducks in a row. You can always try again.

 

[miracleboy]

@lburms Exactly The plan was to sell house 1 and get another house. But when standard bank said they can give me 1.5 mill I thought then I mos dont need to sell! Foolish I know

 

[lburms]

@miracleboy Don't be to hard on yourself. On the bright side you have two properties whereas most people don't even think about one, end up renting their entire life's. Your ambition is to be applauded, but don't let the ambition exceed the finances
Your on the correct path just manage it slightly better. Don't give up after one bad investment. Learn and move forward.

 

[prissanna]

@miracleboy My question is how then fuck you getting 2 bonds with that combined income?

My wife and I clear triple that on a bad month and we get laughed at when applying for a second bond. And yes, we have good credit

 

[drawingangel2]

@prissanna This is the real question.

I'm at +50k pm income and had to commit tooth and nail for a second bond at 1.2m. 1st bond was 800k. Credit when applying was +-710

 

[miracleboy]

@prissanna And I went straight to standard bank. Gave salary slips.. truthful with expenses and all that. 1.5 mil at a sliding scale interest. Starting at 10.5 for first 5 or so years then move with rate -0.5.
I also gave them the OTP and they sent some1 out to view house. Even I thought that was way to much because property24 gives me 47k gross combined needed for 1.3 mill and we are sitting at R39500 gross

Look.. we are making it. Just.for 7 months so far. But it hasn't been easy.

 

[nolongerchaff]

@prissanna because the first bond is almost paid up and he most likely registered a surety bond over the first property when they granted him the second bond.

 

[chucklemethis]

@miracleboy You weren’t in a position to buy the second house but alas. Normally I’d say sell the first house but with only R115k remaining I think go for option 3, struggle for a bit and dump whatever extra cash you can get into it until it’s paid off, this will depend on your raises though. If it’s still undoable you might have to sell and buy a cheaper flat cash then use whatever rent you get from there towards your bond in the second house.

 

[everyoneneedsjesus]

@miracleboy Paying more into house won't make installment less. It will just make your installments finish sooner. Bond payments are calculated in a way that you pay off the house in a certain time, and then pay interest per month depending on the balance owed. If interest rates go up, your house payment goes up. If amount owed goes down, monthly payments stay the same, as more of the installment goes to the debt then interest. Essentially every time interest rate changes, they adjust your total monthly payment, but nothing else will change the monthly payment

 

[potluck045]

@everyoneneedsjesus But this is not true... you can always ask your bank to readjust your installments over the period left on the bond...

 

[pokymom]

@miracleboy Are you declaring your rental income on house 1 with SARS?

 

[miracleboy]

@pokymom No. Not initially. But in process.

 

[kalynnken]

@miracleboy They know. If youre using a credible agent They know

 

[ocd]

@pokymom My first thought as well, dude is in for a SHOCK when that tax bill comes.

 

[savedbygrace26]

@pokymom Get this sorted, you will pay income tax on the rental income less rates, utility bill and levies fees. Call it ~30% based on what you said probably a grand or so a month, so in excess of 10k a year. That’s enough to break you guys. Sorry to be the bearer of bad news

 

[tdear25]

@miracleboy Sounds like u should attempt refinancing the 1st home. Get a better rate, that repayment on. 115k is madness. I moved to a new bank last year, I got prime less 1% and they paid all the moving costs of the bond.

 

[someguy1234]

@tdear25 Sorry for the seemingly silly question, what does refinance actually mean in this situation? Is it like reevaluating the existing bond to get a better rate ? Or asking another bank to pay off the bond with the existing bank and then you pay the new bank back ?

 

[dancequeen12]

@someguy1234 Refinance your new home means get a new bond. For me ABSA paid most of the lawyer fees to get my bond from another bank. I got a much better rate. The other thing is to got to your bank manager and explain your issues and ask if you can get a rate review.

 

[trialsufferer1]

@miracleboy I think you should just paddle along, selling your property for 800k is pointless, you receiving good rental income