All Topics / Finance / How much would I be able to borrow?

Viewing 17 posts - 1 through 17 (of 17 total)
  • Profile photo of BrizzaBrizza
    Participant
    @brizza
    Join Date: 2003
    Post Count: 75

    1st IP – Owe $150k, worth between $200k to $250k. Current redraw available amount $10k.

    Personal Income 135k pa.

    Cash Deposit of Savings $20k.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Hi Brizza,
    There is not enough info posted to come up with an accurate answer, but consider these points :-

    If looking to purchase another IP(s) then you need from 15% to 25% of the value as Deposit and Costs. The remaining 75% – 85% will be the mortgage on the new IP.

    So, your question needs answers to two things –
    1. How much ready cash or equity do you have (for the Deposit/Costs)? and
    2. How much spare income do you have to cover the ongoing costs (e.g. mortgage interest, rates, etc and does the rent cover all of these costs or not?)

    With a healthy wage, number 2 is probably OK for borrowing a large amount (depending on any other loans outstanding – PPOR, car, personal loans, credit cards, etc). So if you have very few other loans, then the amount the banks will lend will be quite high. Of course, different lenders will allow different amounts based on their “rules”.

    Therefore number 2 is not likely to be limiting you – yet.

    Now, with the Deposit/Costs, the upfront amount available will vary depending on the ACTUAL numbers.

    Lets take a guess at the current IP value – say it is $240k. With an 80% loan (no LMI) they will lend you $192k less the $150k owing, so $42k. Add to that the $20k in Cash, and you have $62k as the answer to 1. Costs on something around $300k will likely be $10k+ so allow only $50k as the 20% Deposit – which means you are buying something up to $250k.

    Now, IF you are able to borrow nearer 90%, then you need far less in Deposit/Costs, so this will allow you to borrow much more than $250k. As you can see, the above is not simple to figure out, and you need to KNOW a lot of the actual figures involved.

    I would suggest you get a more accurate valuation of your current IP (ask a RE agent for a market appraisal) then take that number, along with a bunch of personal numbers (your other loans) and talk to a Mortgage Broker.

    There are several good ones on here – maybe there will be some of them responding to this post of yours. These are the people who can tell you how much you can borrow, with whom, and why, and they (usually) won’t charge you a cent as the lenders pay them for bringing business to the lender.

    Benny

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Agree with Benny – there’s not enough info to provide a decent response.

    However – from what I’m reading it looks like there’s around $50k in accessible equity in your current property (assuming a valuation of $250k and 80% LVR) – so combine that with your $20k and that gives you $70k to play with.

    Realistically – $70k would cover the 12% deposit/costs on an IP around $400k

    Again though – not enough info to provide an accurate response but hopefully that gives you something to work with.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of BrizzaBrizza
    Participant
    @brizza
    Join Date: 2003
    Post Count: 75

    Thanks for your answers.

    Do any lenders allow LMI to be capitalised above 95% LVR?

    And are there many lenders who will do 95% LVR anymore?

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    95% lends are still possible – but not easy to get approved. The application has to be very strong.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of BrizzaBrizza
    Participant
    @brizza
    Join Date: 2003
    Post Count: 75

    Thanks again. What about LMI? Does that have to be paid out of your own pocket or can that be capitalised into the loan about 95% LVR?

    Profile photo of Shane WShane W
    Participant
    @shanewebb
    Join Date: 2016
    Post Count: 17

    Hi Brizza,

    I have been talking to a mortgage broker to set up a 95% loan. This would be a loan for 93% of the property value and capitalising the LMI into the loan, bringing it to 95% LVR.

    Unsure if you can borrow 95% of the properties value and capitalise the LMI on top of this.

    Cheers

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    Hi Brizza,
    Unsure if you can borrow 95% of the properties value and capitalise the LMI on top of this.
    Cheers

    Still some lenders in this space.

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    You can still borrowing 95%+LMI, however you have to ask yourself whether its worth it. LMI rises exponentially in cost, so generally above 88%+LMI the leverage value diminishes to the point that for every dollar of deposit you save, you’re actually paying $2 in extra fees -hardly a good return on investment. In terms of LMI, I’ve written about finding the ‘sweet spot’ here: http://www.precisionfunding.com.au/lmi-friend-or-foe/

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    You can still borrowing 95%+LMI, however you have to ask yourself whether its worth it.

    Some people do no have a choice and are happy to go to 95% + cap on an IP whilst others wont go above 80% so depends on your risk profile.

    Corey is correct though, 88% is the sweet spot between leverage and LMI premiums.

    Also helps with some banks auto credit scoring methods as it keeps the whole deal sub 90% which is considered less risk by the lender than +90% LVRs.

    • This reply was modified 4 years, 2 months ago by Profile photo of Colin Rice Colin Rice.

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 114

    Hi experts
    A simple question.

    Does going to MB across different states improves one’s borrowing capacity instead of just stick with the same state due to convenience
    and accessibility reason?

    Or that has little, if any, effect at all?

    Unfortunately I am in the exact position that after discussing with couple of local MB I was told no more borrowing possible.

    Thanks,
    FXD

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    Does going to MB across different states improves one’s borrowing capacity instead of just stick with the same state due to convenience
    and accessibility reason?

    If you use a WA Broker you will always be better off ;)

    Just joking, it makes no difference as the criteria / process is universal when assessing an application.

    Like any profession there are varying levels of competency and experience so the brokers you have spoken to could have missed something due to a few factors so no harm in getting a third opinion.

    • This reply was modified 4 years, 2 months ago by Profile photo of Colin Rice Colin Rice.

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 114

    Ok thanks Colin although when I was scrolling down the screen first seeing first line in your response I got excited :-)

    Anyway, the actual situation when I said no more borrowing I mean I have heaps of equity but lender will not extend/increase existing
    LOC limit or let me have an additional new LOC/loan facility. The reason is simply that no servicing power left.

    However, I suspec that if I use the existing LOC as 10% deposit for the next purchase which will return a rent income, the lender may be
    willing to let me access equity in existing properties say another 10% to 20%, while the new property itself will secure a new investment
    loan and also brings in rental income.

    Am I correct or am I being overly ambitious here?

    Thanks
    FXD

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    Anyway, the actual situation when I said no more borrowing I mean I have heaps of equity but lender will not extend/increase existing
    LOC limit or let me have an additional new LOC/loan facility. The reason is simply that no servicing power left.

    Do you have all your lending with one bank?

    Did the brokers you approached check other banks as servicing varies between banks and depending on your scenario and what you want to achieve there may be other options but hard to say without knowing the full picture???

    However, I suspec that if I use the existing LOC as 10% deposit for the next purchase which will return a rent income, the lender may be
    willing to let me access equity in existing properties say another 10% to 20%, while the new property itself will secure a new investment
    loan and also brings in rental income.

    Rental income can be used to increase servicing but the corresponding debt has to be considered as well, both with existing bank and new bank for remaining 90%.

    Sounds to me like you may have all your eggs (loans) with the same. Whilst ok for a 2 or 3 properties going beyond this will present certain risk you would need to mitigate. Also would need to look at uncrossing securities if they are crossed but may or may not be possible depending on serviceability and which bank/s you are currently with.

    I would suggest you get a third opinion via a pre-limanary assessment form a competent broker experienced in investment finance structuring.

    • This reply was modified 4 years, 2 months ago by Profile photo of Colin Rice Colin Rice.

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 114

    Hi Colin,
    No, all my properties are across multiple lenders already and not crossed.

    Thanks,
    FXD

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    @FXD looks like you may have capped out, which is becoming more common.

    Pre APRA it was rare occurance that a deal could not be placed, now its a once a week event.

    Did they try Liberty or FirstMac as they are one of the few lenders left that will do other banks debt at actual repayments and only buffer debt with them?

    • This reply was modified 4 years, 2 months ago by Profile photo of Colin Rice Colin Rice.
    • This reply was modified 4 years, 2 months ago by Profile photo of Colin Rice Colin Rice.

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 114

    Hi Colin
    I have no idea as the MB use their respective own aggregator which looks like another layer of obscurity to me.
    But thanks for suggesting that.

    Thanks,
    FXD

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