My wife and I own our home and we'll shortly be in a position to buy our first rental property using money saved and possibly using equity. With any luck, or rather sound practice I hope to earn positive returns or close to it from day one. I haven't spoken to any brokers yet, but I do have a query about the serviceability of the IPL or the banks willingness to pony up the mulla. This is where you guys come in for now, I hope you can enlighten me.
Just say you want to purchase a rental property and it's un-tenanted at the time. Obviously you will be able to meet the banks serviceability criteria or afford the repayments etc when it's tenanted, but when you're applying you don't have that rental income to support the extra repayments so HOW does the bank approve the loan on that basis…And then the next loan after that and then the next one and so on????
I'm only just starting to get my head around how everything actually works and it's my first post here so your help is appreciated. Cheers.
Cameron.
Hi Cameron,
You just get rental appraisals from 3 real estate agents and use that to provide your lender with the rental income cash flow proof that will allow you to service your loan.
Regards.Get two or three written rental appraisals. the bank will generally factor this in at 80% to allow for vacancies, some costs such as management fees and rates. ie. rental appraisal of $300 per week = $1200/month (approx) bank allows $960. This is a rough working out. Ohers such as Richard would be able to give you more info regarding the criteria of individual lenders.
Sonya
That's a great help guys thanx!
Cameron
Burnie
There are many variables in calculating serviceability and no 1 lender is the same.
Lenders will normally take your net income and then add in a percentage of the Gross rental and from this deduct certain expenses including existing loans, potential credit card limits and a living allowance.
Arriving at a net figure they will work normally divide this by a principal & interest factor based on a serviceability rate slightly higher than the standard variable rate to allow for potential rate increases.
Of course in saying all of this what one lender will offer can be totally different to another and therefore it is a matter of fine tuning your strategy to enable you to keep buying and moving forward.
Richard Taylor | Australia's leading private lender
Lenders will just go on the market rent which is usually from the figure on the valuation report.
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
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