My borrowing capacity

Hi guys,

just wondering if someone could give me an estimate of my borrowing capacity.

Income: $200k
PPOR: value $750k loan $230k
IP 1 : value $350k loan $200k rent $300 / week
IP 2: value $720 k loan $410k rent $500/ week

Im married with two kids and wife does not work.

Thanks in advance.

 

not enough info, but around $1mil perhaps

 

Your broker probably could.

 

You could easily get an estimate from online calculators.

Or you can engage a broker and get actual borrowing capacity with a few lenders.

 

Thanks you guys. I was just looking for a rough estimate. I have been borrowing with the one bank for many years however I am at the stage now where I really need to use the services of a decent broker. One who has been there before and can help me set out my goals for the future.

 

Borrowing capacity will be dependent on a number of things such as your monthly living expenses, proposed rental income of the new property, credit card limits, is the new loan P&I or IO etc.

Is your $200k income base or a combination of base plus overtime plus comms, etc?

If we make some general assumptions then the borrowing capacity will be approximately $570,000 however this again has assumed a range of different things which will change depending on the answer to the above questions.

Try and resent the existing loan terms in order to increase the borrowing capacity. Try and leverage off the equity from the existing properties and use that as a deposit for the new purchase. Structure the loans standalone and don't cross securitise the properties.

 

Hi brains trust, a couple of questions I may!

We are 31 and 30, no dependents, currently earn $195k PAYG, $25k from a side business, $20k from dividends, and $97k gross rent. 5 properties worth $3.4m, shares of $850k, cash of $150k, and have $1.99m in loans over the properties, with no other debt.

Most recently a couple of months ago we bought an IP in Brisbane borrowing 75% from Australian Unity Bank. I assume we were at (or very close to) their serviceability wall. We are now looking to buy in Perth, potentially $600k with $500pw rent. Just in the last couple of months (since the previous loan), we have been very excited that our existing rents have increased by $150pw!

1. Is there a general rule of thumb of what $650pw extra rent provides, if all other things are equal? Or even a range depending on the type of lender?

2. Where does Aust Unity Bank sit in terms of being conservative? I imagine somewhere in the middle, between traditional big lenders and non-bank lenders?

3. Should we be worried about DTIs?

4. How much more can we likely keep going in building our portfolio until we hit the wall even with quite "laissez-faire" non-bank lenders such as Pepper, Liberty, etc?

Thank you in advance!

 

1. $650 pw in rent will add around $200,000-300,000 in servicing depending on the lender and depending on corresponding negative gearing benefits that can be factored into the servicing position.

2. AUB sits in the lower/middle range

3. DTI's are lender specific - some have hard DTI rules and some are flexible

4. Best to engage a bank or broker - are their existing liabilities you are able to reduce? Are you able to place existing loans on fresh loan terms and lower rates? The $25k from the side business is an interesting one as if the income can be used (again depending on the lender) this will help increase your servicing by a fair bit.

 

1. There's no reliable rule of thumb that can be applied accross different lenders to determine what the increase in serviceability is as their policies can differ significantly. My experience is that rental income doesn't help as much with serviceability as people think it does. For example some lenders use less than 50% of the rent in some circumstances.

2. I can't comment about Australian Unity specifically, but my experience with the older credit unions (now banks) is that they tend to be fairly conservative.

3. DTI is not the primary metic that determines serviceability, it's just the one that people seem to understand. It does appear to be quite high however.

4. Based on your comments, you're probably getting close to servicing limits.

Posting a bunch of numbers on this forum isn't going to produce a reliable estimate of borrowing capacity. In this case a lot of data has been provided but it's still to ambiguous to make any estimate. The answer to how much can I borrow is always going to be to contact a broker.

 

All existing loans are actually quite new, so perhaps not much extra there. My little side business has been going for about 3 years now. I think it helped with getting the AUB loan a few months back.

Knowing that the extra rent will help a little bit is very very handy - thank you Shahin for some valuable bits of info!

Thanks Peter. Yeah, I understand it's hard to get the full picture just with some numbers. My problem is our current broker is on holidays, but the property in question won't wait that long. I'm hoping to make an offer without being subject to finance on the basis that I can settle it by using our cash and selling some shares...but if we can borrow something that will mean less share sales, which makes a lower tier lender attractive.