Serviciability calc different living home or rent

Discussion in 'Property Finance' started by oneone, 14th Nov, 2018.

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  1. oneone

    oneone Well-Known Member

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    Any brokers here have an idea on how much of a difference in current serviceability calcs will there between living at home vs rent, say about about $400 week ?

    I have an IP1 P&I loan that comes off fixed rates Oct next year Oct. I have 2 other IPs, one on IO and one P&I loan. I'm trying to gauge whether it will be a risk at refinancing time, if I were to be renter by then

    My original plan, before market turned, was to sell one of the other IPs in the coming year. Either use it to reduce overall debt in refinancing or move into IP1 with majority paid off (go into debt recycling as PPOR). But selling it now seems not a great move, esp as I can hold on. But this could be a bit of a wait...and I'd like to move out some time
     
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  2. Redom

    Redom Finance Strategist Business Plus Member

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    Basic numbers, $400 per week is $1733 per month on the expense side. If living rent free, lenders usually include $650 per month (varies between lenders, ANZ at 375, some do it at 650 per applicant. The difference between these two figures is around $150k difference in owner occupier borrowing power (higher for investors, as there's usually investment income to leverage too).
     
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  3. Lindsay_W

    Lindsay_W Well-Known Member

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    Have you checked to see if you could refinance them now, in your current situation? After all the changes from APRA it might be too late, especially if you haven't looked at borrowing position for a year or more?
    As Redom mentioned above, lenders now (post APRA) apply a minimum rental expense even if you live at home rent free - $650 per month is the going rate, so not as bad as $400 per week. HOWEVER there are some lenders that will not apply this minimum under certain circumstances and with the proper evidence, they may apply a nominal rental amount but not $650 - fr example NAB will use $500 per month, not much of a difference but can make or break an application.
     
    Last edited: 14th Nov, 2018
  4. oneone

    oneone Well-Known Member

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    @Lindsay_W I had chatted to my broker around april this year and did scenario test using the post APRA $650 live-at-home rate. It was tight, maybe needed to go to medium tier lender for refinance.
    I now have about $140K in my offset account (which I didn't before), I'm not sure if that'll help come refinance time - I'd like to keep it on hand for access, but might need to use it to reduce new loan debt ?
    Also have a share portfolio, I was planning to sell down , but now is also not a great time

    feels like a waiting game - just getting a bit restless, holding off on 'life' for a refinance date feels sad
     
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  5. Lindsay_W

    Lindsay_W Well-Known Member

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    Yeah I would ask your broker to find some alternative lenders for you, or even try NAB as the $150 per month difference could be enough to get you over the line.
    If no good then two options; pay down debt or Increase income somehow