Im just trying to see how servicing is calculated Actually more interested to know how my current property is affecting my servicing Figures 250k value 200k loan (80%) 300pw rent Lets assume 3.5% interest rate What i believe (im not at all that knowledge hence the questions and off course i believe i could be wrong) Servicing is calculate by many lenders at interest rate + 2.5% and in some cases a floor rate. In this example it would be 6% (3.5+2.5) unless the floor rate is higher. I believe this would be on the loan amount (in this case 200k) Ive also been told yield is kept to 6% by some lenders. Would this be of the property value (15k@250k) or loan amount (12k@200k)? Other thing i know in the formula is most lenders only accept 80% of rent. Is this calculated on actual rent or after the 6% cap (making the cap effectively 4.8%) I did read a thread before where it mentioned properties had to be yielding 9%+ to be not affecting servicing (when servicing rates were 7.5%). Now that rates have dropped would 7.5% (on loan)/6% (on loan) not take a dent on servicing If theres other factors please share Thanks
Im assuming living expenses are not affected whether i hold the property or not? (unless it involves increasing for tax returns) - Maybe i should reworded OP and mentioned would keeping the property increase/decrease my serviceability? Not too sure what you meant by property holding expenses
Not sure what you mean by this, as you mentioned above rental yield is capped at 6% so if a property is yielding 9% the extra 3% can't be used for servicing purposes anyway. Why don't you just engage a broker to do this for you? It's highly likely you'll get it wrong doing it yourself.
