Borrowing Against Mortgage To Pay Rent: I Know This Sounds Dumb but...

[fionas]

has anyone else done it?

I've written about my housing saga before so am reluctant to bore you all with the details again. We currently live in a 3br house with 16-year-old DSD and 2-year-old DD. We need a study, could do with an extra living area and I would kill for an ensuite and a separate laundry.

In the next two years our family could shrink (if DSD moves out) or grow (if we have another baby). Therefore I'm reluctant to sell/buy as we don't know what size house we need long term and the stamp duty would kill us anyway when I want to only continue working part-time.

Extending is out. Too expensive on 1.5 salaries.

I've just seen a rental place. It's expensive but when you work out what extra money we would need to pay the rent as opposed to buying/selling/extending it's much, much cheaper.

So I'm thinking of borrowing the extra money we need against the mortgage and put it in an offset account and gradually using it to pay the extra we need for rent.

I ran this past a financial advisor and he said we'd get the money no problem, there's nothing dodgy about it.

I'm just wondering if anyone else has done something similar?

[helle]

I know zilch about offset accounts... but I would assume eventually the money would run out and you'd have to start paying back the loan on top of your mortage repayments and ontop of the rent for the new house?

Have you looked into reno's? You'd be surprised how much money you'd save if you DIY'd

[Fuzzywuzzy]

Sounds do-able to me. Would you be renting out your current house if you moved into the rental? Because that would more than cover the increase in mortgage repayments. Sounds like you've already crunched the numbers but if you haven't already, check out a home loan repayment calculator on the net (all banks have them on their websites)

[fionas]

Yes, we'd be renting out our current house but the issue is the gap between our rental income for this place and the rental income for the other place. It's a big gap because the other house is huge. And we'd still be paying the mortgage on this place. Luckily, our current mortgage is quite low.

But if you multiply that monthly gap by two years (which is the max we'd move for) then that amount is much, much cheaper than extending. And at that point, we'd be in a position to decide what size house we need long-term. So we could move back to this house and/or extend, sell this house and buy somewhere new or carry on renting but further out of town where we could get somewhere bigger but the same price as we'd be getting in income for this place. Reluctant to do that at the moment because I don't want DSD to have to change school and lose touch with her friends (she's only been here 12 months from the US). But wouldn't hesitate to do that once she's finished VCE.

So really, I just want to do something to get us over this limbo land of the next two years that will mean that I don't have to go back to work full-time.

Unfortunately the extension that we need to do to this place will be 150K+ and it's a second storey so not something we could do DIY Teagz.