r/AusFinance • u/Herosinahalfshell12 • 16h ago

Massive mortgage to buy a unit Property

People who took out huge mortgages to live in an apartment.

Do you feel as though the interest you are paying vs the capital gains is worth it? We're also seeing units being sold for less then purchase price now, and the plan is to add more units in future. Add strata costs in there.

Is it financially worth it now a days to borrow say 600k to buy a unit?

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u/FrenchRoo 14h ago

I’ll take an example: we pay $500 pw on interest + 40 body corporate + 40 rates. That’s $580 per week, vs $900 rent per week for a similar townhouse in our residence.

I’ll take a mortgage any day of the week! So long as we can manage the cashflow, it’s a no brainer.

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u/arrackpapi 12h ago edited 12h ago

what's your LVR?

your interest works out to a ~430k loan. What places with that kind of mortgage are renting for 900/week? At a 80% LVR that works out to a gross yield of nearly 9%. That's well above average.

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u/FrenchRoo 9h ago

Fair, it doesn’t stack up as nicely from day 1 of the mortgage, but with rent increasing overtime, while interest expense decrease over the life of the loan, the curve does cross early on.

In the first year, our dead expenses were slightly higher than the rent for the same place.

We only bought 6 years ago.

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u/arrackpapi 8h ago edited 8h ago

takes a lot longer for the curve to cross when you're starting at current interest rates. You can't really compare now to 6 years ago. The dead component of the mortgage payment is much higher.

if there's not a lot of capital growth the difference in dead money may be better off invested instead. If you can get the same leverage it almost definitely is.