Borrowing against equity

Hi everyone

I have a 2 mil portfolio i encumbered
- PPOR worth approx 600k
- 3 IPs, 500k, 500K and 400K

I am earning about 120k a year, Mrs makes 80k a year. Rental income is about 45k a year net.

We would like to borrow against our equity ( whilst we still have serviceability due to our income) and then stop working so that we can use the money to live off and pay the interest also.

Is this possible and if yes what sort of borrowing capacity are we looking at? What sort of loan products are available out there?

 

I assume you mean 'unencumbered'?

You can borrow against property, but lenders will want to know what you are going to use the funds for and they won't lend for those reasons.

You could potentially borrow around $1.6mil from a servicing point of view - very rough and a lot of factors will influence this such as age and spending.

 

Yeah sorry typo

can i say and I will actually buy shares, then i sell them and keep the cash, making off monthly repayments of course to the bank?

 

by 600k of non deductible debt are u referring to my ppor? If so it is paid off so there is no debt on it.

also didn’t quite understand your completely, a lot of technical terminology is beyond me

 

If you buy sensible old boring LIC's then 1.6 mil will give you approx $80K dividend income and you never have to sell the shares. Just a thought.

 

That approach ain't got no bling. It's all about the bling.

 

Chotu you might want think of other options. I have had more than $80k gain in 2 days on $1.6m this week on growth shares, many have made 50% on purchase price on companies I told Nodrog 3 years ago were much better than his LIC's. I have taken 50k tax free profit as I sold down ones that had little gain, or a loss to offset some that had a small gain of up to 10%. I have kept my gains and still had increase in portfolio. Good managed funds such as Maven so far (15%) and lakehouse ( about 30%) would be better than LIC's . remember you also get 50% tax discount on CG meaning more of your capital can be left in the company compounding away. to net the same $.. Any way if your property cant pay for the loan plus a buffer change the property and tranfer the loan, that way you can safely buy risk higher risk high return but great buisiness;s. Dont fall for the dividend trap which are usually companies with poor growth prospects a growing 2% yeild will soon return more than a 5% with declining or static share price. We compare LICs vs ETFs, which is best?

 

So 600k PPOR, IP 1.4m, no debt.

Some of the limitations of LOE (Living off Equity, borrowing to fund living expenses and interest) are serviceability, cashout purpose limitations. Longer term, interest rate risk and continuing serviceability / cashout limits if you need to do it again. The risk is you pull enough for a number of years, then at the end of that the properties haven't moved much, and you cant borrow more even though you have equity.

It seems that living off income would be a lot more viable. But that means getting into shares etc.

 

I am a fan of living off equity as it can delay the need to sell down properties for many years to come and allow for some more capital growth to be achieved - if done the right way

 

Or even better - some dude said he made $1 million yesterday betting black at the roulette table. Why not gamble that way instead?

If you've won the game already by accruing that much equity don't risk it chasing a single sector bet. The odds are against you. Diversified sector, diversified globally, diversified currency. You won't get the best return, but won't get the worst one either.

The share market has a habit of blowing people up who think they're smarter than the rest.