How much would I be able to borrow?

Hi Brizza,
There is not enough info posted to come up with an accurate answer, but consider these points :-

If looking to purchase another IP(s) then you need from 15% to 25% of the value as Deposit and Costs. The remaining 75% – 85% will be the mortgage on the new IP.

So, your question needs answers to two things –
1. How much ready cash or equity do you have (for the Deposit/Costs)? and
2. How much spare income do you have to cover the ongoing costs (e.g. mortgage interest, rates, etc and does the rent cover all of these costs or not?)

With a healthy wage, number 2 is probably OK for borrowing a large amount (depending on any other loans outstanding – PPOR, car, personal loans, credit cards, etc). So if you have very few other loans, then the amount the banks will lend will be quite high. Of course, different lenders will allow different amounts based on their “rules”.

Therefore number 2 is not likely to be limiting you – yet.

Now, with the Deposit/Costs, the upfront amount available will vary depending on the ACTUAL numbers.

Lets take a guess at the current IP value – say it is $240k. With an 80% loan (no LMI) they will lend you $192k less the $150k owing, so $42k. Add to that the $20k in Cash, and you have $62k as the answer to 1. Costs on something around $300k will likely be $10k+ so allow only $50k as the 20% Deposit – which means you are buying something up to $250k.

Now, IF you are able to borrow nearer 90%, then you need far less in Deposit/Costs, so this will allow you to borrow much more than $250k. As you can see, the above is not simple to figure out, and you need to KNOW a lot of the actual figures involved.

I would suggest you get a more accurate valuation of your current IP (ask a RE agent for a market appraisal) then take that number, along with a bunch of personal numbers (your other loans) and talk to a Mortgage Broker.

There are several good ones on here – maybe there will be some of them responding to this post of yours. These are the people who can tell you how much you can borrow, with whom, and why, and they (usually) won’t charge you a cent as the lenders pay them for bringing business to the lender.

Benny

Shane W wrote:

Hi Brizza,
Unsure if you can borrow 95% of the properties value and capitalise the LMI on top of this.
Cheers

Still some lenders in this space.

You can still borrowing 95%+LMI, however you have to ask yourself whether its worth it.

Some people do no have a choice and are happy to go to 95% + cap on an IP whilst others wont go above 80% so depends on your risk profile.

Corey is correct though, 88% is the sweet spot between leverage and LMI premiums.

Also helps with some banks auto credit scoring methods as it keeps the whole deal sub 90% which is considered less risk by the lender than +90% LVRs.

• This reply was modified 8 years, 4 months ago by  Colin Rice.

Does going to MB across different states improves one’s borrowing capacity instead of just stick with the same state due to convenience
and accessibility reason?

If you use a WA Broker you will always be better off ;)

Just joking, it makes no difference as the criteria / process is universal when assessing an application.

Like any profession there are varying levels of competency and experience so the brokers you have spoken to could have missed something due to a few factors so no harm in getting a third opinion.

• This reply was modified 8 years, 4 months ago by  Colin Rice.

Anyway, the actual situation when I said no more borrowing I mean I have heaps of equity but lender will not extend/increase existing
LOC limit or let me have an additional new LOC/loan facility. The reason is simply that no servicing power left.

Do you have all your lending with one bank?

Did the brokers you approached check other banks as servicing varies between banks and depending on your scenario and what you want to achieve there may be other options but hard to say without knowing the full picture???

However, I suspec that if I use the existing LOC as 10% deposit for the next purchase which will return a rent income, the lender may be
willing to let me access equity in existing properties say another 10% to 20%, while the new property itself will secure a new investment
loan and also brings in rental income.

Rental income can be used to increase servicing but the corresponding debt has to be considered as well, both with existing bank and new bank for remaining 90%.

Sounds to me like you may have all your eggs (loans) with the same. Whilst ok for a 2 or 3 properties going beyond this will present certain risk you would need to mitigate. Also would need to look at uncrossing securities if they are crossed but may or may not be possible depending on serviceability and which bank/s you are currently with.

I would suggest you get a third opinion via a pre-limanary assessment form a competent broker experienced in investment finance structuring.

• This reply was modified 8 years, 4 months ago by  Colin Rice.

@FXD looks like you may have capped out, which is becoming more common.

Pre APRA it was rare occurance that a deal could not be placed, now its a once a week event.

Did they try Liberty or FirstMac as they are one of the few lenders left that will do other banks debt at actual repayments and only buffer debt with them?

• This reply was modified 8 years, 4 months ago by  Colin Rice.
• This reply was modified 8 years, 4 months ago by  Colin Rice.