Hi All,
I am a first time property investor and first time posting on the forum. Sorry if this question is a little amateur; however any constructive feedback would be greatly appreciated.
I have been doing research and preparing for my first property investment. I have recently seen a mortgage broker and was told I could borrow up to $500,000 based on my current circumstances. So here is my question:
Lets say I invested in a few properties and than maxed out my current borrowing capacity; does this mean I can not borrow any additional finance? If the properties I bought were positively geared and therefore I still have the exact same ability to repay any additional loans based on my income and I was able to save up the same amount of deposit as I do now; would I be able to borrow another $500,000? effectively allowing me to build a portfolio of $1,000,000. Additionally is their a limit in the end as to how much you can borrow, or as long as you can repay the loans and continue to be able to save the deposits for additional loans, you can continue to borrow to accumulate more property?
Thank you
Hi Arkad
Welcome to the forum.
I understand what you're asking – but there's no straight forward answer.
For each property you accumulate – the bank will take into account the liability and the rent it receives (usually at 80% of the gross rent). So to improve your borrowing capacity via IP rent – you'd need to have pretty high yields.
One of the best ways to maximise your longer term borrowing capacity is to select the right lenders at the right time as you accumulate properties. For instance, lenders that don't inflate the repayments on your existing liabilities are great for savings towards the end – whilst lenders who are less generous with their borrowing capacity calculators can be good to use up first.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thank you for the advice Jamie, very helpful. Would you recommend using investment loans as P&I so that over the years the loan is slowly reduced and therefore the risk is slowly reducing? I understand most people prefer investment properties to be IO especially when they are repaying their PPOR; however I do not have a PPOR as I only rent
Thank you
I'd keep them all as IO with an offset linked to one. Park any spare cash you have in that offset.
Keeping the loans IO will also improve your borrowing capacity with some lenders as well.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thank you very much for the help Jamie, much appreciated
No worries – best of luck.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Just because the properties are positively geared does not mean that it will help with servicing. There are numerous ways to improve your servicing. Most of the investors I manage hit the equity wall faster than the servicing wall so you need to factor that in.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
TheFinanceShop wrote:Just because the properties are positively geared does not mean that it will help with servicing.Why not?
Additional cashflow = increased servicing.
I understand what you're saying about available equity usually being an issue before servicing for a lot of investors – but I wouldn't say CF+ properties don't help with servicing. They certainly don't hurt it.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Banks limits or exposures to one individual or company are usually around the 1.5 million dollar mark. This doesn't mean you cannot borrow more then that with the same bank but they will begin to make things difficult for you and in some cases will outright refuse even if you have a perfect record of repayment history you have surplus cash flow and equity.
They might want you to change to P&I for some of your loans to start repaying some debt. Which is where switching new loans to another bank comes in handy.
LMI providers also have exposure limits to clients as well.
When it comes to lender exposure – I usually try to avoid having more than $1m with the same lender.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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