i know i can afford an i.p. but the bank doesnt

If this is your first I.P I wouldn’t be too concerned about buying a more expensive property. You can do that on the next one!
$200k is certainly enough to buy an I.P in many parts of Australia. You just need to re-adjust your idea of what you want to buy. Besides, cheaper properties quite often provide better rent returns which will help your cashflow.

You can buy a well built, well positioned 2 x 1 free-standing or semi-detached villa unit in good condition (or bad condition if you feel inclined to be a renovator) for mid-high $100k’s all over the place. It may not be your ideal choice, but it’ll have a bit of land component, and if that’s all you can afford, then that’s all you can afford.

As a general guide, banks will only let you borrow upt 35% of your income for loan repayments (including any existing loans, c/cards and/or car loans).

Based on your income of $74k p/a, you can only repay $498 p/w approx.
If you still owe $310k on your PPoR your commitment to that is most likely around $417p/w? and that is interest only (I assumed 7% interest). This doesn’t include any other debt. If my calculations are half correct then you probably are lucky to be able to borrow as much as the bank said.
I would say your house value is not your problem – your serviceability seems to be more the issue to me.

Of course, the bank may also take into account the rent return on the property to help your serviceability on the loan. This can help you to borrow more. Ask your bank what % of the rent they factor into the lending equation. Many will only allow 70% of the rent, some are a bit more.

A low doc loan will get you a few more thousand in funds possibly, but there is usually a trade-off of slightly higher interest rates, probably mortgage insurance as well on the loan.
This adds more pressure to your repayment amount and adds to your risk exposure. Not a good idea if you don’t have to do it.

Cheers,
Marc.
[email protected]

Hi G.
A lot of what you ask will depend on whether or not you have a deposit for your planned property, or if you were planning on using existing equity in your own home. If this is the case unless you refinanced your home loan to around 90% of it’s value (and thus paid other fees etc, including a large chunk of ‘Lenders Mortgage Insurance’ – a once off charge) you have not really got much in the way of ‘equity’ to play around with based on the figures you supplied. A low doc loan, so called, is generally for self employed people/ business’s that are not able to or choose not to provide full financials. Again, generally you would require a 30% deposit to make the most of this arrangement, or at least 20%. (i know some lenders offer more – such as rams,and Wizard even offer a 95% ‘lo doc’ loan….) Lo doc loans have postcode restrictions too, so you cannot generally ‘lo doc’ a preoperty out in the middle of nowhere out in the rurals…..although your proposed budget sounds like that is not what you had in mind.
Interest rates / fees increase reflected by the higher percentage you borrow with these lo doc loans as a general rule of thumb too.
Congratulations on your excellent wage to service the loan. Again, depending on how you are situated as far as availalble deposit and equity go, some in your position may see this as a great time just to start saving some of that income – as if you were paying that ‘imaginery loan’ off, and in no time you will have a deposit. And one more pointer that may be of interest, some lenders will assess your ability to repay a lot more generously when using a ‘fixed rate ‘ loan. All helps the bottom line. Hope that has helped a bit rather than confused….And all the best. [strum]

It was a good move going to a mortgage broker as they will really have an interest in helping you achieve your goals and will work hard towards finding the right bank and product to suit your needs.
And will have access to many lenders.

Duckster Financial Services
http://www.ducksterfinancial.com
Helping to make the great Australian Dream come true !

Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Chris

The last development deal you put to me you had negotiated 1% below SVR yourself wouldnt have thought any MB would have got it down to that for you especially on a 80% GR basis.

Cheers

Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.

The order of those questions in the last post was wrong 65ens – you should have put the “havin’ a beer and relaxing” question first. That’s the priority!

Anyway, the options are many, but my 2c worth;

If you are planning to stay in the PPoR, I think it’s best to reduce that loan as fast as possible because the interest is not tax deductible.

However, if you move out and rent your PPoR (not many people would do this due to the emotional attachment) then the interest IS tax deductible, so it may be better to not reduce it in this case.

You can rent out your PPoR for up to 6 years without becoming liable for CGT on it.

Cheers,
Marc.
[email protected]

“we get sent lemons; it’s up to us to make lemonade”

Adelaide Bank Shared Equity scheme is not available for an Investment property  – YET.