Just wondering what percentage of your income are people prepared to pay for:
a) loan on PPoR
b) rent
c) investment property/properties?
I’m interested because I want to how much is a comfortable loan to take out
Thanks! [biggrin]
Traditionally, as a rule of thumb, most banks won’t let you borrow more than 35% of your gross wage for home loan repayments. However, I have heard of people borrowing much more than this cut-off figure in recent years, and it amazes me that lenders allow them to do it.
This figure is seen as the cut-off point for your lifestyle before it starts to suffer from cashflow problems and potential financial hardship.
So if you earn $60k per year , you can service around $400 per week in accommodation payments as an upper level.
It could probably be applied to all of the options you listed in your post, with the exception of I.P’s as there is rental income factored into the equation as well.
Most banks will look at around 70% of the rental income as a supplement to your existing income when calculating you serviceability for a loan, probably keeping the 35% cut-off in mind I suspect.
Personally, I reckon you would want to keep closer to 30% to factor in cash needed for surprises that life throws at you.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hi Pizang
Marc is accurate in assessment but every day new loan products get introduced to the market.
One of the latest is a shared equity product whereby clients can live in an house where probably loan repayments would be higher than they could afford yet the are only required to make payments on 75% of the purchase price.
There is no interest charged or repayments made during the loan term and the lender takes his money out of a share of the profit when the house is sold.
This frees up monthly income to enable to buyer to invest more in IP’s yet still living in an attractive upmarket area.
I had a client today who was unable on serviceability to purchase a waterfront property they wanted at Noosa but by only making payments on 75% of the purchase price could easily afford it.
They have gone to contract and with the suplus funds are looking to get into 2 separate IP’s.
It is not a matter of what a lender will lend you but more about what you feel confortable in paying back.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New 100% Shared Equity scheme coming soon – Email us for details.Richard Taylor | Australia's leading private lender
Always calculate it yourself, don’t let the banks tell you. Otherwise they just give you 30 year loans so the payments are as small as possible and you pay as much interest as possible.
I have seen people pay near 55% of their GROSS income. After tax that leaves them with about 20% I don’t know how they did it but they do. Most people who are actively repaying are about 35-40% if they have no other debts. But people who just pay minimum start at 35%ish and tend to go down to 30% and then 25% or less.
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