Just reading Michael YARDNEYS newsletter and thinking about getting my next property, I was wondering if you could give me an answer as to how much I could possibly borrow at this point in time?
My current situation is this;
I earn about $50K per year, my partner who will earn about $15K this year is on maternity leave and I have a 7yr old (shared custody 25/75%) and we have a 6 month old baby.
I have my phone, vehicle, fuel etc paid for by my company so save there and I have about $17K in various shares, we own our other vehicle outright and apart from loans have no debts. Properties were valued about 18 months ago.
Investment Property #1 is in my name
Fixed Interest- Interest Only 6.2%
We owe $80K on it
It is valued at approx $195K
It Rents at $150 p/wk rising to $160 in September.Investment Property #2 is in her name
Fixed Interest- Interest Only 6.2%
We owe $80K on it
It is valued at approx $145K
It Rents at $155 p/wk and has just risen.Principle Place of Residence is in both names
$100K Fixed Interest- Interest Only at 6.4%
$ 68K variable LOC at 7.4%
It is valued at approx $195KAny thoughts on how much I could borrow for my next Investment Property?
Y
Doing some rough figures, I would say a maximum of about $50,000 which assumes the following:
– your 50k income is a gross annual figure
– your wife is on unpaid maternity leave and her 15k is not used
– you have no credit cardsThis would increase once your wife recommences work. Serviceability is calculated at your position at the time of application.
Hope this helps.
Robert Bou-Hamdan
Mortgage AdviserCan the mortgage brokers have a rough look at my figures here..am I on the right track for Y?
I find looking at this kind of post interesting
Just a quick look shows the IP’s are doing well
IP1
$150 x 52
= $7 800.00 income
/ $80’000.00 loan
= 9.75 %IP2
$155 x 52
= $8’060.00 income
/ $80’000.00 loan
= 10.07 %*Not taking into account running fees, taxation, depreciation, loan costs etc
$195k +$145k
=$340 K
-$160K
=$180K EQUITY on IP’sPPOR
$170k approx
-$195k
=$25K EQUITY on PPORTotal equity approx $205 K
On loans of $330K$100k FI/IO at 6.5% = $541.00 per month at 3 yrs
$70k Variable P&I at 7.5% = $489.00 per month at 30 yearsTotal of $1’030 per month or $257 per week loan on PPOR
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorOriginally posted by Y:Just reading Michael YARDNEYS newsletter and thinking about getting my next property,……
Y
Y
That’s really great.[biggrin] I am happy that my newsletter inspired you.
GO FOR IT!
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.metropole.com.auRed, your figures look fine.
One thing though…
You are doing returns on the IPs based on the outstanding loan amounts. IP 1 is only returning 4% on current valuation and IP 2 is only returning 5.56%.
The figures you have done show that the properties are positively geared which is great for cashflow but not the best as an overall investment when looking at the asset values.
Robert Bou-Hamdan
Mortgage AdviserDoes my partners rent count as income, how about her Family tax benefit A and B payments etc when looking at her total income for serviceability?
How about the rent coming in from next Investment Property?
We have a chance to rent out PPOR as well and may look after a friends place for a year, , we bought the PPOR two years ago and have saved the $17K in shares plus some in cash during this time.
Am thinking of either a unit or a house for next IP depending on whether we can get the next loan..
any ideas?
Y
Tax time is coming also, we will get a reasonable return, it would be nice to get another Investment Property soon.
Y
If you are married or defacto, her rental income will count. Most main stream lenders will not look at family benefits. This is not very much anyway.
The rent from the next property will also count but all rental income will only be used at about 70-80% of gross.
If you rent out your house, a rental figure will apply even if you live at a friend’s place for free for one year. The only way out of this is living with parents.
Please sit down with a mortgage adviser. It will all become very clear.
Robert Bou-Hamdan
Mortgage AdviserI’ve been looking at Western Australian properties, possibly a unit or a house in a smaller complex in Perth, Rockingham , Mandurah or even further afeild, i was thinking of anything up to $180-200K max if it was a house less for a unit.
This is just an example mind you.
I would structure the loan as a Fixed Interest-Interest Only Loan to lessen payments and increase benefits..
Obviously i would have to restructure all loans then as i couldn’t get a stand alone loan, no matter what?
I’ve been told family benfits part A count as income, not sure of total we get though as it goes to a seperate/saving account and i haven’t looked
Y
YI am not saying you could not get a stand alone loan as I do not know your individual circumstances. It is important that all the information is provided to give a more accurate response.
For example, a fixed interest only loan will be more expensive today than a variable interest only loan.
Regarding the family benefits, many lenders will accept this but the interest rate will be higher in most cases.
There are some good tools and calculators available at…
http://www.mortgagepackaging.com.au/index_files/tools_calculators.htm
It is important not to over-commit yourself especially having children. The current market is also very flat and in decline in some areas. This makes it harder to change structures if need be as a result of reduced property valuations and lower capital growth.
Robert Bou-Hamdan
Mortgage AdviserTMA
How about if he refinances the loan and takes IP’s to 80-90%, leaving PPOR as it is and having a cash bonus for next IP?
Any other viable strategies..?
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorIf serviceability was not the issue, refinancing to the maximum would certainly be a viable option. I would avoid going over 80% though to stay away from mortgage insurance unless you knew you could cover this expense through your investments.
The PPOR is almost maxed out anyway and has fixed rates which may incur break costs if moved. There is not much flexibility there anyway when considering LVR.
Unless staying with the same lender and seeking loan increases, there will usually be substantial break costs all around but when considering the rate of the fixed interest loans, I don’t think anything will be charged for breaking these loans.
Y will have to pay more interest on existing loans if refinancing so there is a lot to consider.
Robert Bou-Hamdan
Mortgage Adviser
You must be logged in to reply to this topic. If you don't have an account, you can register here.
