How do you service multiple loans on the same income?

Discussion in 'Loans & Mortgage Brokers' started by sharkling, 6th May, 2020.

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  1. sharkling

    sharkling Member

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    17th Mar, 2020
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    Location:
    NSW
    Hi everyone

    Newbie here so please be patient while I try to understand the concepts of property investing. I have a question to ask regarding how the servicing of multiple loans work when one is on a limited income, i.e. how do property investors buy multiple properties over time and accumulate a large total mortgage while being on the same income through their working life?

    For example, I was informed by the mortgage broker that my servicing ability would be limited, as the monthly mortgage repayments on the one investment property that I own is taken into account as an expense (amongst other living expenses). While I understand this is necessary in case of vacancy, the repayments are actually covered by the rent. And if one were to do that for multiple properties, then surely ones expenses would be exorbitant and thus have no servicing ability whatsoever? What other factors allow property investors to buy multiple properties despite being on the same income?

    If anyone can explain how this works it would be really appreciated.
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Perth WA + Buderim Qld
    Your current expenses DO get taken into consideration - but so does the rent - did your current broker factor them in?

    The fact is that many - if not all - of the investors boasting large portfolios did their buying in a different credit environment.

    Investors coming into the market today have to do things differently - the good news is that there are options to extend borrowing capacity but it does mean being very strategic with your lending and how you manage your cashflow and risk.

    Not all borrowers will be comfortable with the risks of buy and hold - we have to use some pretty quirky lenders to buy more than 3 investment properties for many average income investors - and we’re finding more and more are starting to learn about small developments as a way to continue to reduce debt and expand their portfolio.
     
    Last edited: 6th May, 2020
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  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It basically doesn't work. At a point in time you will hit the wall and the only way to overcome this is to get a bigger income and or reduce debt. There are many smaller things you can do to tweak it a bit but ultimately it comes down to income and debt levels.

    But, even if you could only ever qualify for loans for 2 properties you could end up getting the third by a combination of saving and paying down the loans on the existing ones. It will take a long time to get the third, but the 4th one will be a little bit quicker.
     
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  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Your borrowing capacity takes into account all of your income (salary, rental income, etc) and all of your outgoings (all debts, credit cards, living expenses, etc). There are policies around how these figures are determined.

    Hence any loans you current have will be considered in the assessment of a loan application.

    If you want to be able to borrow more, you need to either pay off existing debts or increase your income.
     
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