All Topics / Finance / Theory of Serviceability – aaarggghhh!
Hi all,
Once you you've reached your borrowing limit, assuming your income stays the same, do you have to wait for your rents to increase before you can borrow more?
I know each bank has different models, so i'm just after a general theory as I'm kinda stuck knowing what I can do long term.
I've currently borrowed 1.3m (which is the most CBA will lend me). If my current rents of 60,000 were to increase to 80,000 in the future, it means I'm getting an extra 20,000 per year in income (for example).
The extra 20,000 a year I get will service $250,000 of existing debt at 8% (assuming banks use 100% rent for a simple example)
Does that mean that someone will then lend me the $250,000 for another property, assuming the we are on the same original incomes?
Is that how it basically works to continually buy more property over time?
Thank you for advice/explanation you can offer,
Robert.
Not really.
Generally only a percentage of the rents will be taken into account – maybe 80%. Also you will have higher taxes with higher income so this will work against you too.
talk to a broker as each bank has different policies and some take into account deductibility of interest and add back depreciation.
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
The % used for rentals does vary between lenders, so it is a case of working the numbers. Also some lenders will not add a safety buffer on rate for servicing calculations, when you have 3 year fixed (may just be a portion)
Time to start looking at lenders with more generous servicing calculators – AMP can be quite good in this regard and have a decent basic product to boot.
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]
No you dont! plenty of banks will take in consideration deductibility of interest and add back depreciation..
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
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