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Borrowing Capacity

Discussion in 'Property Finance' started by blackenator, 2nd Dec, 2015.

  1. blackenator

    blackenator Well-Known Member

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    Hi Guys ,

    Just wanted to get a second opinion on my current situation.

    I have currently purchased 3 investment properties this year and getting towards a deposit on purchasing another property hopefully around Christmas or new years time.

    I have been using a broker who has been good up until now but with this latest purchase he recommended me going with Liberty loans. After doing some investigation and looking around on the forums it seems that this means that this next property will probably be my last for sometime until my I have more equity in my pocket.

    My current situation is as follows :
    income : 90-100k depending on overtime
    living expenses: Live at home with my parents so don't have any rent to pay but I do pay some bills etc
    loans : $1060250
    lvr: : about 89%

    I have no other debts other then the investment properties and as you would probably expect in a strong flow cash position and able to save a large amount of my salary.

    I would like some advice on if my serviceability is reaching my limit as my broker has mentioned?

    Would it be best still to pay interests only on all the accounts and have the surplus money in the offset against my property with the largest debt or pay principle and interests to help with my servicing as I from what I have read each dollar I pay towards my debt would enable me to borrow 5 more dollars (?)

    I am currently in my acquisition phase at the moment and currently have a very aggressive mindset in regards to LVR and risk tolerance so I would like to continue purchasing if possible.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You have borrowed 10x (or more) your annual income which is high and you are also highly leveraged which is risky to lenders. Hope you have some cash as a buffer.

    I wouldn't pay down loans if you don't have a main residence, but just keep saving cash in the offset account against the loan with the highest interest.
     
  3. blackenator

    blackenator Well-Known Member

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    Never saw of it that way but I do have cash buffer in place which will be a little dry once I use some of it for my next deposit.
     
  4. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    What is the total rental income you are currently receiving?
     
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Agree with this.

    It *might* also enhance your future borrowing capacity keeping these loans as IO.

    Cheers

    Jamie
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Tick tock ............... it my actually make thinsg worse if ASIC and Apra hensive get their way.

    ta
    rolf
     
    Terry_w likes this.
  7. Redom

    Redom Mortgage Broker Business Member

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    Haven't ran the numbers (no rental income), but it looks like servicing will be very tight with most calculators there. Liberty is probably one of the few lenders you'll service with. Can try run the numbers with Homeloans too, but they are more expensive.
     
  8. Logan

    Logan Well-Known Member

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    ????
     
  9. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Lenders are starting to calculate the repayments on loans you currently hold at P&I and the remaining term after your IO term expires.

    So in other words - if you've got a loan with lender A that's interest only for 5 years. When lender B assesses your application, they will calculate the repayments with lender A based on a 25 year principal and interest term.

    Cheers

    Jamie
     
    Logan likes this.
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Not only this, but the living expenses we have to work on needs to be more realistic. No more just putting down the minimum the lenders assess on, but we have to ask the clients what they actually spend. This will be the next focus by ASIC and the banks. My aggregator has already reported audits by banks of living expenses of clients. Lenders will ask the broker how did you ascertain the client's living expenses.
     
  11. Logan

    Logan Well-Known Member

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    This could actually work in my favour as my living expenses are lower than average !
     
  12. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Unfortunately not. All the banks have a minimum figure which they use unless the figure given to them is higher.
     
  13. Mick C

    Mick C Well-Known Member

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    Presuming rental income of around 4% and loan on I/O..you still have borrowing capacity with the traditional banks, just not the big 4 or Citibank/ suncorp/ ING / Bankwest etc...
     
  14. blackenator

    blackenator Well-Known Member

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    Thanks for your input guys I fotgot to mention the rental figures

    Unit qld 260$ a week
    Another unit qld 340$ a week
    House Sydney 550 a week
     
  15. Tony Xia

    Tony Xia Member

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    Your broker seems right, if you want money and you"re tight on servicing with the bigger banks then Liberty is the way to go. I mean whose taken "actual" repayments on servicing these days? Especially with their sharp rates.