All Topics / Help Needed! / Have I got this right?

Viewing 9 posts - 1 through 9 (of 9 total)
  • Profile photo of Chris89Chris89
    Participant
    @chris89
    Join Date: 2011
    Post Count: 49
    February 5, 2012 - 1:19 am

    With regards to borrowing capacity, is the below scenario correct of how this works?

    Wage: $54,500
    Borrowing capactiy: $317,000 (Using ANZ Calc)
    IP: $150,000
    Deposit: $30,000
    Loan $120,000
    Rent: $11440 ($220 PW)

    In the first year, I pay the loan down to $100,000. The property is now worth $160,000 and my equity is $60,000

    $30,000 equit
    9152 (80% of rent) to my annual income
    $63,652
    Borrowing capactity (minus 100k loan and plus 32,000 Equity): $312,000

    Is this correct or have I got it horribly wrong?

    Thanks in adavance for your help everyone :)

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    February 5, 2012 - 9:30 am

    Hi Chris

    I must admit i read your post a couple of times and got myself lost.

    There are so many variable when it comes to serviceability it is not funny so we will make the assumption that the Anz calculator i about right.

    What you have to realise there is a big difference between equity and useable equity.

    Equity can simply be described as the difference between the valuation and the loan amount so on your figures this would be $60,000 being $160,000 less $100,000.

    Usable equity is the difference between the loan amount and the maximum percentage a lender will advance again the valuation.
    Assume this is 90% then the useable equity is $160,000 x 90% = $144,000 less $100,000 so is $44,000.

    Having equity does not increase your borrowing capacity as this is solely based on your income and expenditure.

    I am not quite sure what you are trying to achieve so if you give us a bit more information we can advise you further.

    Cheers

    Yours in Finance
     

    Richard Taylor | Australia's leading private lender

    Profile photo of Chris89Chris89
    Participant
    @chris89
    Join Date: 2011
    Post Count: 49
    February 5, 2012 - 9:43 am

    Thanks for the reply Richard.
    I was reading a book and it said the banks will only take 80% of the equity in your property, hence the 30k equity I added onto the borrowing capacity, which as you said doesn't increase it.

    I guess what I was asking was after the above workings out would I be able to purchase a property of up to 312,000, assuming the ANZ calc is correct?

    If the equity you mentioned (44k) not borrowing capacity is it still "unrealised" money I can utilise?

    This isn't based on any real life situation, just trying to figure out the whole using equity to continue purchasine property.

    Also, the way I added 80% of the rent as income and worked out the new borrowing capacity, is that correct?

    Thanks for your reply Richard! Appreciate it

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539
    February 5, 2012 - 10:04 am

    Hi Chris

    Why not get someone who really understands all this to help you and lodge a mortgage application for you.  Richard's a great operator and will sort you out.  Why not give him a call…

    jac

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Chris89Chris89
    Participant
    @chris89
    Join Date: 2011
    Post Count: 49
    February 5, 2012 - 10:06 am

    Hi JacM, cheers for the response.

    Im more throwing around numbers, speaking hypothetically trying to understand how these few things work.
    I want to understand it as well, rather than rely on someone else to make all my decisions for me.

    Thanks though!

    Chris

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    February 5, 2012 - 10:17 am

    Hi Chris

    Yes the 44K subject to serviceability is available to be used.

    You can use 80% of the current or potential rent for serviceability.
    Remember though if the property is negatively geared you need to adjust your Taxable income to take this into account.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Chris89Chris89
    Participant
    @chris89
    Join Date: 2011
    Post Count: 49
    February 5, 2012 - 10:26 am

    so given the above example, taking the rent into account (using the ANZ calc) I would have a new wage servicable salary of 63, 652 to use for a new loan?

    Thanks Richard, I cut alot of corners and over simplified the scenario so I can understand how equite and rental income work with borrowing capactity.

    To summrise, equity is unrealised cash and rent adds to my income to provide my borrowing power?

    Thanks for your help Richard

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    February 5, 2012 - 10:33 am

    Hi Chris

    Another thing to note is that ANZ are just one lender with one way of calculating borrowing capacity – and their calculator is not the most generous. If you are able to (and want to) service a higher loan amount then there are other options.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Chris89Chris89
    Participant
    @chris89
    Join Date: 2011
    Post Count: 49
    February 5, 2012 - 10:34 am

    Thanks Jamie, I assumed as much.

Viewing 9 posts - 1 through 9 (of 9 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.