Selling and serviceability

What do you mean by serviceability? As in lender serviceability? You need your broker or banker to tell you exactly how much your servicing will be in both scenarios. There are also ways you could increase your servicing. 

Yes you can. Different ways you can increase your servicing; 1. Different Lenders will lend different amounts. For example CBA is very conservative, 2. Fixing a portion of your loan (but I would recommend against this for a number of reasons).  For example, Westpac increases the servicing if you fix the loan. 3. Factor in Negative Gearing into the income calculations 4. Look at possible renting your PPOR whilst living with parents 5. Decrease credit card limits to the bare minimum

I can't possibly give you a definitive answer without looking at the whole picture and anyone who does it talking out of their backsides. Yes its obvious that a negatively geared property is not fantastic for servicing however there is more to it than that. Have you factored in selling costs? Have you factored the short, medium or long term potential for development of those properties? How long will it take before you convert those NG properties to PG properties? Personally I have a hold strategy but that is because I land bank and look at maximising by properties to become positively geared or there is some potential for capital growth.

I own a property which I sat on for about 7 years before the zoning changed and allowed for sub-division. I bought it at a steal, sure enough it was negatively geared for a while but I was happy to ride it out until the zoning changed for me to do what I wanted with the property. Sorry for the long reply but its not that black and white.

Hi Matt

It's impossible to advise without kowing the specifics of your situation.

There are also other ways of improving serviceabilty before selling a property. Here's an article I wrote.

one of the best ways to assist in not hitting a servicing wall too quickly is lender selection – using the right lenders at the right time as you accumulate IPs.

Cheers

Jamie

Matt, what do you mean? $21 per week net would be better than $20.

For serviceablity the more income you have the more you can service. The less loans you have the more you can service.

Are you wanting to know if this helps serviceability or hinders it?

It would probably hinder because:

1. Banks assess loans at a higher interest rate, and/or

2. Banks take into account x% of the rent, often 80%

But, it would be much better for serviceability than if it was a negative $20 per week.

Hello Shahin,

Can I ask why fixing a loan hurts serviceability?  Why is wrong to do?  I am still learning, so can you please explain.

thanks!!

Thanks Jamie!  With the interest rate being so low right now, I was thinking it would be a good time to fix. What other things should be taken into consideration?

By the way there are no problems in fixing as some need to fix to manage risk.