Australian Money Forum

[TCR]

Hi guys,

After many years of just paying the regular fornightly mortgage repayments we've finally found ourselves in a situation where we have about $200-$250 extra per week "surplus".

We've considered just putting this into our existing mortgage whcih is still reasonably substantial or possibly even buying an investment property. The thought behind the investment property is that local property prices are dropping and the rental demand is still relatively high. This means that we'd likely be in a situation where the difference between the rental income and the mortgage repayments could be covered by our surplus.

Of course if interest rates shown any signs of rising we would probably jump into a fixed rate for 3 years and then look to sell the property near the end of that term if we found we couldn't kee pthe property.

What are the pros and cons of this scenario? Worth considering or should we just hammer our current mortgage?

Thanks.

[pointstores]

I would put the money into your mortgage for the moment. While your local house prices might be low at the moment the global economy is so unsure of itself right now that in my opinion you need to play it safe till at least the end of 09. I think you will find then that you can at least by your investment property for the same price as today if not cheaper. So my advice is hold out.

[Miller]

I think it depends on the source of the "surplus". What kind of job do you have? If there is a chance of loosing it (even temperoraly) then I would put everything in mortgage. Investments - bring debt, mortgage payments - cut debt. Nowadays debt is too dangerous.

Personally, for 1-2 years I would stay as conservative and defensive as possible. No Europe, no boat and even no new plasma.

At the same time I understand that if everyone stops spending we are screwed even more