You’re confusing deposit requirements with borrowing capacity. The amount of equity you have does not change how much you can borrow, it is related to how much deposit funds you can make available for a purchase. In short:
Borrowing Capacity: How much debt can you afford based on your current income and expenditure
Equity: How much cash/equity can you release to provide as a deposit for a purchase
In terms of equity, Australian banks won’t lend against UK security, you would need to engage a UK based bank to do this.
Keep in mind Mike that releasing equity on UK property might actually count against you !!
eg my wife recently got knocked back on a loan with CBA through a broker here on the site because CBA used the APRA serviceability on our PPOR here in NY (the property is worth about $US2.2m), the current mortgage on this PPOR is around $US975,000 which if you work out at todays current exchange rate is around $A1.25m
Our monthly payments are $4433pm
Now here is the kicker……even though our PPOR mortgage is fixed for 30 years at 3.5% CBA in Australia insisted on calculating the serviceability requirement at 7.59% a total of 4.09% higher than what we are actually paying.
Basically our $4433pm would is being counted as almost double even though our mortgage rate wont and CANNOT be changed for the next 28 years and 6 months.
Im not sure what rate you can borrow on your UK property from a UK bank and if its as low as 3.5% but its something to think about, might make sense to apply/borrow in Australia and then borrow from the UK after the loan has gone through to ‘equalize or release equity’.
Wouldn’t your Broker have known that CBA used a sensitised rate on external loans whether they be in this Country or not ?
I don’t know….. it was my understanding from the broker (who is active on the list here) that CBA was the best to go for as they treated my wifes existing IP’s and PPOR debt the best…..eg would let her leverage the most…..lol or not as it turned out :(
As a side note Aussie banks wont take foreign property as security as there is no way (or at best long and protracted) to get a hold of the security to recover funds in the worse case scenario.
@colin, Yep we weren’t asking for the Australian banks to take into account our NYC PPOR in anyway apart from repayments which like I said CBA screwed up by insisting on calculating the interest rate at 7.25% when our PPOR loan is a 30 year fixed at 3.5% and no matter what we did to explain that the loan was fixed for the next 28 years and 10 months……at 3.5% they couldn’t understand why their calculations were illogical.
In the end we went to Westpac and they approved us for a $700k loan at 70% LVR (the irony that their subsidiary St George wont extend our portfolio loans because we are expats but that the Westpac parent division is happy to take our money…..still puts a smile on my face and cracks me up).
CBA shouldn’t assess the debt at 7.25% for the existing US debt, but instead 25 years P&I (or 30 years if P&I from day 1) @ 20% above the prevailing interest rate on the associated debt.
In any case banks aren’t quite sure what they want these days in terms of expats/OS borrowers – more so non residents.
@corey, lol try telling CBA about 3.5%+20% exchange……and that’s why they didn’t get our business. :)
Likewise you are right about St George not knowing what they want and no allowing us to increase our portfolio loan……and that’s why they don’t get our business either. :)
Westpac took forever to get approved and came back twice to make sure we really didn’t own a car (eg I don’t think they understand the parking situation in NYC)…..but said yes so they get our business for our next $700k IP mortgage (and most likely first dibs at the next one after that as well in 2018).