Hi There,
Just looking for some info with regard to my borrowing power – my personal circumstances aren't really taken into account by any of the online calculators I've been looking at. I know I could go to my bank to find this information, but I haven't had a chance with work, and this place appears to be a pretty big pool of knowledge.
I'll try and cut this long story short, but here's my circumstances:
1) I'm 26, single and have recently returned to Australia after 2 years travelling.
2) I currently earn $40k p.a. before any overtime – add an extra 5k p.a. for the purposes of the exercise, but it's probably a little more.
3) I bought a 2br unit in regional NSW when I was 19 for about $130k – I still owe about $115k on it, and had it valued 12 months ago at $209k. It was my PPOR for about 4 years. Currently leased at $290/week. Repayments $390/fortnight. Paid almost $3k in advance and continuing to add to this at least 10% of my salary.
4) I don't pay rent – I have living arrangements that cost me about 8 hours of my time per week – gardening, maintenance etc. My living expenses are very low – groceries, a little fuel and a modest phone bill every month.
5) On my travels, I racked up about $11k on my credit card, which I have paid down to just under $7k – hope to have it completely eliminated by March or April next year – yes, I've done the balance transfer thing, paying very little interest on the bulk of the remaining debt. Once this is out of the equation, I intend to slash my limit to about $2000.
With all this in consideration, how much could I potentially borrow for another IP once the credit card balance is back to zero?
Thank you for considering…
Hi Streaker
Welcome back.
It will largely come down to the amount of rent the new IP will attract and where interest rates are sitting next year when you intend to purchase the next IP.
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]
Thanks Jamie,
Most of the properties I've been looking at (only roughly based on what I think I might be able to borrow) are attracting between $300 and $350 per week – if I can afford something with a higher rental return or better yield, then by all means I'd do it.
I completely understand it could go either way, but let's assume interest rates are at the same level they are now. Plenty of reasons for them to go up, plenty to push them in the other direction…
Hi,
Firstly i made a few assumption, each one has a MASSIVE impact on the outcome even if it’s a few $ difference…
1. income of $45,000 ( 40 base, 5 over time…you need to have 6 month proof of over time )
2. No dependent
3. No another debt what so ever- no Hecs, no personal loan , car loan etc…
4. No another income beside salary and rent ( current $290, and new $350)
5. I had to include rent that you pay of “$290 pw” as it’s impossible to declare to a bank you pay no rent but do maintaine work instead UNLESS the home owner is willing to write a stack deck
6. I presume your credit limit is $11,000—
Borrowing capacity:1. $226,500 – $250,000 (comfortable range) —
—- Tip—
1. DONT pay down the credit card , yes may sound a bit weird…but if your purpose is to buy a IP you need money for the deposit…deposit is key….with a $0 balance credit card the bank will still look at your limit.
A $7,000 deposit has more buying power then a $7,000 credit card limit, also the new lender will be happy to reduce your credit limit to $0 and pay it out with a separate LOC if required….but they will not GIVE you money for a deposit
2. Do you live with your parents or is the arragment with some frds etc?
3. I suggest you get a copy of your credit file- since you done a few balance transfer this will affect how the bank looks at your file and this will determine which lender you should choose.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks Michael,
No dependants, no other debts at all, might be able to get a stat dec for my living arrangements, but let's assume my circumstances change (or those I'm living with) and that I have to find a place to rent. I could, in the current market, find a room to rent for $150/week in my area – certainly much less than $290.
My current total credit limit is $22,500 – old card, and the new one to which I have transferred the bulk of my debt to. I will be requesting to have this at about $2000, as I won't really need it once it's paid off. I just wanted to make the most of every opportunity I had while travelling. I know the banks don't really consider it, but I'm very, very good at living within my means.
With my current savings, there's no reason why I couldn't have a $20,000 deposit 12 months from now if I reduce the credit card debt (and limits) and continue to save what I'm currently paying off those cards once the debt is eliminated.
Thanks again in advance for your help.
You have a slight serviceability and deposit problem; both which can be easily fixed….one possible solution is to re-consolidate your debt with your current mortgage but have it linked as 2 separate home loan/account for tax reasons.
Remember you have the advantage of investing young and having some equity in your IP; use it to your advantage.
Refinance with a term loan of $115k + a $20,000 LOC to pay out your personal debt – the $115k can still be claimed for tax as an IP, while the OC can’t as it’s an personal debt as expected. — this results in you having a home loan with an LOC which is a lot better then a $20k CC.
Regards,
Michael
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks again Michael,
Am I correct in assuming that a line of credit, much like a credit card, will reduce the amount of money I can borrow on the loan? If I've got no credit card and no line of credit, wouldn't I be able to borrow more than if I had a line of credit? I'm essentially trying to maximise the amount I can borrow to purchase another investment property.
I'm in no hurry to move on anything just yet, as my local area (much like the rest of the world) is currently a buyers market and I don't see it changing significantly in the next 12 months or so… I'm happy to pay down my credit card, then save a deposit, so that my only debt is my original mortgage on a property that's cashflow +ive.
Would this maximise my borrowing power, based on my current income?
Well if that’s the case and your not planning on buyin in the next 12+ month, then yes having NO debt will improve serviceability….so pay down CC and save for deposit.
A lot of work to pay out a $22,000 debt ( 18% interest) + deposit in 12 month- but i admire your determination…it’s always feels great to be free of bad debt.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Sorry Michael – I may not have explained myself well enough (bad habit of mine sometimes) – my credit limit is about $22,000, but I currently owe just under $7,000 and most of this has just been transferred to a new card on which I'm only paying 0.99% interest for 9 months.
So… Assuming I can pay this off and save $15,000 as a deposit in the next 12 months, what do you think my maximum borrowing power might be?
Thanks again to both of you for your input on this – it's greatly appreciated – I'm just trying to set challenging, but also realistic targets for myself to work towards.
Ah, yes. Thanks Jamie.
Back to the topic… Can anybody advise what my maximum borrowing capacity would be if I eliminated that CC debt, saved a $15k deposit, earning $45k p.a. with around $100k equity in another IP, no dependants, no other debts with the loan to buy a property making between $300 and $350 p.w. in rent. Existing IP making $290 p.w. with repayments of $780/month?
Many thanks in advance.
After a little more research, can I assume that I might be able to refinance my current IP, up to 80% of it's value, taking $80k ($100k equity) and borrow about another $250k?
Streaker that is about right.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard.
Much appreciated.
Hey Everyone – this seems like a great forum
I am interested in buying my 1st home, this is my situation:Single Applicant
1 x 17 year old child (finishing school in 1 month & will be financially independant)
Annual Gross Income: $60K Salary + Super etc
House I want to purchase: $305K
Deposit (inc FHOG): $15K
House will be rented to existing tenants for 1st 6 months ($320/week)
I have been at my current job for approx 6 months. Prior to that I had 6 months off work to travel (I had savings to live on). My employment prior to that was for 19 months during which time I have a savings history saving $12K.
Prior to that I lived in NZ (where I was born) I owned a house back there but sold it to relocate here.
I have a credit card with a $5K limit but $0 balance
No other loans or financial commitments except usual living expenses i.e. food, petrol etc.Could you please give me some advice as to whether I will be eligible for a loan & whether any of you can help me with the application process.
I understand that there is stamp duty here – I believe I don't have to pay that.
Thanks in advance, Amanda
Hi Amanda and welcome to the Forum.
Based on what you have given- you can afford a loan of around roughly $265,000.
I added your child as dependent still as to become “financially independent” she/he needs to be over 18 OR have moved out etc…The question of IF the bank would lend or not is a diff story and would require a lot more personal details + a look at your credit file, employment status and saving history to determine.- But based on what you have said so far, i would say YES it’s possible to get a loan but you most likely going to have to apply to a lender that allows NON-genuine savings up to 95%.
Why?1. FHOG is not considered to be genuine savings with most lenders, and if your LVR is higher then 90% then genuine savings plays a huge part
2. You will be applying for a 95% + LMI loan.Regarding stamp duty- depends which state your in??? Ie VIC- yes still stamp duty, but discounted at 20% etc, NSW – none for now but will change …
Can any of the brokers or anybody help?; we sure can….
To be honest your situation is not as bad as you think, it’s a matter of applying to a NON-genuine 95% LVR + LMI lender- rate will be higher around 7.6%.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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