Does shares fully franked dividends increase borrowing power?

Discussion in 'Loans & Mortgage Brokers' started by fuudrizzle, 10th Nov, 2016.

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  1. fuudrizzle

    fuudrizzle Active Member

    Joined:
    30th Oct, 2016
    Posts:
    33
    Location:
    Brisbane
    Hello,

    I'm new to shares and have not really researched into the area, just curious how banks/lenders generally view shares and the dividends that they provide? Would they generally view it similiar to rent and evaluate it at 80% in case of market drops etc? Or could they see it as a risky asset depending on what is invested. Any insight on the pro and cons of shares and how banks view them when it comes to borrowing would be greatly appreciated.

    Thanks!
     
  2. tobe

    tobe Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,814
    Location:
    Melbourne
    No, it doesn't.

    Each lender is different in how they assess dividend income. Some 'deem' the dividend off the capital value. They use their deeming rate, around 2% currently, of the share portfolio value.

    Others will use up to 80% of the dividend income as declared in your tax return over the previous 2 years. Most will only use well known stocks, 'large caps' and well known managed funds etc.
     
    albanga likes this.