Hi all,
As above, what would be the upsides and downsides of both?
Im looking at buying at buying positive cash flow property in Tasmania, but am if their are any consequences of buying an investment property first, such as having trouble buying a PPOR. Could buying an investment first make it harder / reduce my borrowing power for a PPOR?
The reason why im considering this is because Im currently living in Melbourne (from Tasmania originally) and through my calculations it would seem my currently rent ($245) is a lot cheaper than if I was to buy a $300,000 place around Melbournes outer suburbs. On my current wage things would also be reasonably tight and would feel I would be slightly over extending myself with the repayments (wage being (50k gross).
If I was to buy an IP I would be able to get a foot in the market at a great price, considering current market conditions. Also with buying a PPOR in Melb I would be another 6-12 months away from having a decent deposit to purchase where as a sub 200k place in Tas I could almost immediatly be able to buy.
Your thoughts? They are much appreciated
Chris
Your core problem is your “borrowing power/capacity” – do you know how much EACH lender would lend you?
It’s common to see a $20,000- 40,000 difference in borrowing capacity depending on the lender and the product type you go for…it’s not as simple as income, and how many debt and credit card you have
So the question is, do YOU want it to be a PPOR or IP? to answer this question would depend on balancing between 2 factor
1. Deposit
2. Borrowing capacityIf you low on deposit, then PPOR would help as you get the $7,000 FHOG + the TAS stamp duty concession….but if deposit is not an issue and borrowing capacity is a IP purchase ” MAY” help….i say may because even though you get “rental” income…if your renting somewhere else in the mean time it would counter each another out…as a matter of fact it normally decrease your borrowing capacity.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Interesting, thanks for the reply Michael.
Im currently living in Melbourne by the way, so I have worked out that I would be paying back $384 a week with an interest of 7.1% on a loan of 280k or there abouts. Which is why I have thought of buying an IP in Tas possibly before I by a PPOR in Melbourne.
I see where your going with this
it would decrease it my borrowing power but with that said, the IP would be basically paying itself, with some help from me under $100 a week i would be aiming for, with all costs factored in.So therefore, I would be saving $39+ dollars rather than owning a PPOR, would these calculations be correct? And that isn't factoring in plant depreciation.
Does this sound right / a better option to start (buying an IP first)? Or have I completely missed the plot somewhere along the line and haven't factored in hidden expenses.
Hi Chris
I'm not sure if this helps but I put together this blog entry the other day on ways we've helped clients boost their borrowing capacity.
It's available here
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]
You haven;’t missed the point- but it’s not the way the bank looks at it …the bank look at this as a 30 years loan…your calculations are based on TODAYS market.
What happens if the rate goes up to 10%? or even 18% ( the good old Paul Keating days…dw im to young to know how a 18% interest rate is really like anyway ….) then your $39+ per week becomes negative VERY VERY quickly…
So what does the bank do? they have certain guild-lines which mange these possible changes:
** Note: this is the reason for the Massive change in borrowing capacity as well***1. Most bank will only accept 70-80% of the rental income ( 2 lenders that i have dealt with will accept the rental income at 100%! if LVR is under 80%)
2. The servicing ratio ( the interest rate that the bank looks at, to work out if you can afford the loan or not) is based on the standard SVR + 1.2-2% ( so ranging from 8.7-9.9%) The lower the servicing ratio the better your serviceability of course + if your happy to take on a fix rate of 3-5 years the bank would consider using the fix rate + 1% as your servicing ratio ( ~7.6%?)
So a loan of 280,000 on 8.7% = $468 p/w (I/O)
Rental of $400 p/w x 70% = $280 pwYou can work out the rest
Yes it may look “bad”, but sometimes it’s a matter of finding the right lender and product type that SUITS your situation- like a jigsaw puzzle
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks for that Jamie, was helpful
Shape: Thanks for your insight, regarding the interest rate increases you mentioned, that would have thethe same effect whether it was an IP or PPOR. In that situation you would be better off with the IP, as it is bringing in renting, therefore making repayments easier correct?
But I understand where your coming from with the servicing ration.
Jamie and Shape, im interested in your opinion, what would you do given my position. Buy a PPOR in Vic (outer suburbs) for 300k and possibly struggle for at least a few years before being able to buy an IP or buy the IP first in Tas between 150-200k and being very comfortable money wise?
Would it be hard for me to buy a PPOR say 1 year after I purchased the IP. My wage is 55k per year if that helps.
Thanks guys
Chris89 wrote:Jamie and Shape, im interested in your opinion, what would you do given my position. Buy a PPOR in Vic (outer suburbs) for 300k and possibly struggle for at least a few years before being able to buy an IP or buy the IP first in Tas between 150-200k and being very comfortable money wise?Would it be hard for me to buy a PPOR say 1 year after I purchased the IP. My wage is 55k per year if that helps.
Thanks guys
Hard to say given the basic details only…would need to know a lot more to provide a justified answer ( how long you been at job, how stable, expecting kids? marriage expected? , credit card debt and limits etc…)
Either shoot me or Jamie an email and we should be able to work it out..another wise feel free to post on the forum.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks, shot you an email
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