Ask Paul: Sell investment property to pay off my home loan?

Q. My question is about whether to sell or not to sell an investment property.

I live in the Shoalhaven, which has seen some capital increases over recent years.

The property is valued at $420,000 with a loan of $200,000.

I also have the home I am living in, which is valued at $550,000 with a mortgage of $213,000.

My partner and I are thinking about selling the investment property so that we can pay off the mortgage on our home.

We also note that a developer has applied to build 43 units near the investment property, which we believe will drive down house prices in the area.

I have a job paying $89,000 a year and my partner has an occasional casual job.

We have around $10,000 in savings.

What are your thoughts? - Robert

A. Well, Robert, you have saved me asking the key question as you have described the situation quite clearly.

You have seen some capital improvement but you state a developer may be building units near you, which will drive down prices.

Clearly you would be better off with the funds from the investment property in your mortgage offset account.

I have no expertise in your local conditions but the general principle is simple.

If you get population growth in excess of property supply, along with good access to jobs, schools, infrastructure, entertainment and lifestyle, then in the long run prices should move up.

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