I've been getting people contacting me asking about how I have used Cashbonds/Annuities to increase serviceability.... When one has a few IP's under their belts the issue of serviceability will eventually rear its ugly head. The banks/non-banks start balking to lend out borrowed funds due to one not meeting their lending criteria. As you know banks/non-banks determine serviceability under 2 modules - LVR & DSR. Where the majority of investors start reaching their borrowing capacities is in relation to DSR. In other words, insufficient income to service one's debt levels. Now this doesn't become a problem if one can increase their income, so how can that be done.... There are many ways - however the main way most investors know is to increase one's PAYG income and/or increase their rental income. As these methods are fairly reliant upon / restricted to market conditions the majority of investors become stuck on where to go to from there. Most overlook the store of equity they may have available from low LVR's created over time due to past capital growth. That's where I've utilised a Cashbond or Annuity stucture into play, to work around potential serviceability issues and to allow me to keep accessing finance in the property acquisition phase of our portfolio. A cashbond works by converting existing portfolio equity into cash flow for the purposes of increasing one's income in the eyes of the banks/non-bank lenders. The basic way it works is as follows - one purchases a Cashbond/Annuity or guaranteed income plan from an insurance company or bank. I use Challenger Life, a life insurance company. The annuity income plan is then paid back, either monthly, quarterly, 6 monthly or annually over a nominated term. These terms can range from one year to 50 years. Which term best suits depends upon a number of factors such as one's equity level availability, one's annual income increase required, and the minimum term requirements of one's banks/non bank lender. I use 5 years with annuities purchased with funds from offset accounts and LOC's. Purely as an example, if one purchased a $100k cashbond with a 5 year term maturity, each year one would received around $20,000 plus interest paid back. Now when one goes to a bank/ non-bank lender to loan funds for their next property purchase, 100% of the extra annual income can be shown on the INCOMES side of the loan application cumulative to one's existing PAYG Income & rental income...You have effectively increased your borrowing capacity from the annuity income, in the eyes of the bank/lender. If LOC funding is used to purchase the annuity, one is effectively purchasing an income stream and therefore it comes at a price. That price is brought about by the interest rate differential between LOC & annuity rate earned. IMO one should examine their own personal situation before deciding whether its a viable option for them only after having explored and/or exhausted all other less impacting options available. This how I have been able to keep borrowing for income producing and lifestyle purposes. Now I know this type of financial structure is not for everyone. It's an advanced strategy for experienced investors with substantial equity holdings contained within their portfolio - all based around one's big picture investment strategy, goals, time frames & individual investor risk profile. Being able to build a substantial size residential property portfolio is NOT about 'property'. Its about finance and structuring it in such a way so as to be in a position of being able to continually accessing it to keep purchasing and building your portfolio further. You must meet the banks/lender LVR & DSR lending modules and continually place yourself in a position to do so 'before' hitting their module walls because if you leave it until after its too late - catch 22. Hope this provides some food for thought.