Hi there,
I am a first timer to property investing and I wish to know if rental income gets included in the income part of the Debt to Income equation (Debt/Income)?
Is this correct?
DTI = Monthly Total debts +Liabilities/ Total income (salary + rental income?)
Also, this is probably an obvious question so please bare with me, can we use the deposit (20% of a property) from property #1 and then later down the track say the value of the property #1 has gone up by 30k within a year, then use this as a deposit for property #2? In other words, can a deposit that was used originally for my first investment be then drawn out using say a LOC to fund my deposit for my second investment?
Debt to service ratio is the common name = Total financial commitments / Gross Income x 100 = Lenders like to see desired max. at 50%. YES you are correct.
As a first timer these statistics are a little irrelevant, learn some fundamentals – What you are describing above is called equity release, in principal your thoughts above are correct. (fundamentally you are not using the same deposit but releasing the equity – capital growth). There are many skills and tricks you can learn, get it right and you get to retire young. Get it wrong and pay off your home at 50-60 and retire later like the rest of Australia. http://www.birchcorp.com.au
Also bear in mind that most loans these days are also Credit scored in additional to using a numeral based calculation and the combination of the 2 will produce the lending result.
Equity release is a common strategy and one i have used effectively to get where i have today.
Remember Rome wasnt built in a day so a skillfull Mortgage Broker is one who can work with you and show you how to best utlise both your income and equity to achieve the desired goal.
Richard Taylor | Australia's leading private lender
Ok so let me clarify this with an example, say a place was bought for $320000 but a year later it gets appraised at $350000. If I put in $64,000 (320,000 x 20%) deposit on the home, to calculate the deposit after the appraisal, my deposit will now become $70,000 (350,000 x 20%)? And this deposit of $70,000 can now be “released” and used as a deposit for my second property?
Ok so let me clarify this with an example, say a place was bought for $320000 but a year later it gets appraised at $350000. If I put in $64,000 (320,000 x 20%) deposit on the home, to calculate the deposit after the appraisal, my deposit will now become $70,000 (350,000 x 20%)? And this deposit of $70,000 can now be “released” and used as a deposit for my second property?
Doesnt quiet work like that.
Dont forget you can only usually access a maximum of 90% of the current valuation so in your example $350K x 90%
= 315,000 less existing loan of $256,000 = Access to $59000.Richard Taylor | Australia's leading private lender
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