Hi guy's im new to this and my questions might seem obvious but can I use equity to purchase investments? If so How much equity do I need and how much of my own cash? What about buying mutiple IP's? How does it work? Does my wage need to cover all loans or can rental income be factored in. I have a fair knowlegde of my local market and have done reasonably well out of it so far, but would love for this to be my "job" It just seems getting going (loan approval) is the only thing holding us back.
In general lenders will take into consideration your net monthly income plus a percentage of the anticipated gross rent.
From this figure they will deduct any existing loan expenses, a set living allowance dependant on the size of the family as well as a percentage of your credit card limit etc. This will give them a net surplus and from this the borrowing amount can be calculated factoring in a principal & interest repayment at affordability rate.
There are of course numerous variables between lenders which will mean the amounts you can borrow vary considerably.
Structuring the loan is also important to ensure you not only maximise your borrowings but also minimise your risk.
Richard Taylor | Australia's leading private lender
If you have private debt, never good to use your cash for investments. Best to use equity by settling up a separate loan on the home and investing that. Keep the cash to pay down your home loan and save interest and increase tax deductions.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yes great post Terry.
Keeping your own cash out of the deal is always the best option. Using the banks funding(which depreciates with inflation!!)
is always preferred.There are many factors like Richard said that come into play with the budgeting and No 1 importance is the buffer!!
Hi Luvmud,
My thoughts – Is to use as much of your own equity as possible to buy IPs. If you can utilise as much of the equity you have available (dependent of course, on max borrowing power & servicibility of the loans), then go ahead.
If you are doing considerably well in your area, and you know your local market trends, then that is a great stepping stone for you.
Buy as many as you can! Property has to be one of the most safest avenues of wealth creation….
Having it sitting there, rented out, and claiming on as much as you can on tax!
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