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If this option is available to you, definitely go with it with serviceability in mind. You effectively cut your repayment expense by up to 3-5 times just by expanding the loan term out.

Sorry Albanga, completely missed your qn. General guide think of the repayment of personal debt as an expense. Given that the loan terms are so short (relative to mortgages) - they have a larger impact on your borrowing power than longer term debt (mortgages). Difference between lease and...

Haha i'm pretty sure ethnicity isn't in lender policy. For some lenders, as Jamie said, a letter would do. Others have it as a necessary part of their servicing calculator. Cheers, Redom

Adding one more general 'back of the envelope' and timely rule, what happens to your borrowing power when the interest rate falls by 0.25%? Generally a rate cut means borrowers increase their borrowing power as either: (a) banks 'assessment' rates fall by 0.25%. (b) existing debt repayments...

Haha this is gold. Well said Peter. Most brokers would write their own loans i'm sure. You'd need an absolute massive portfolio to run a business relying on this though.

Personally, id keep 1 CC to manage cash flow and pay for transactions. If it comes down to extracting the last dollar out for servicing, it is one option that can be taken to increase borrowing power. There'll likely be multiple options to progress though (e.g some lenders wont include the...

Haha good on you, love the enthusiasm. Reducing dependants, cutting credit cards = pretty good combo to increasing borrowing power without income rises.

Definitely. Best way to compare properties on an even footing.

Good advice here, one way to generally think about this is if 80% of the rental income > mortgage repayment, it shouldnt do too much harm to your overall servicing. This is a simple analysis, but a general guide. Another common one used is 8.5%+ yields would be needed to add to your borrowing...

Thanks! This ones difficult. If there's a difference between the interest rate your paying and the current market interest rate, there would be some marginal increase (perhaps $1.01!). Cheers, Redom

Definitely agree with you gents on this - hence the caveats all over OP and it only meant to used as a back of the envelope quick calculation. The question about 'whats happens when I get a 10,000 pay rise' gets asked a lot - it's just some quick calculations to illustrate a rough...

In OP I was talking about changes from your current position. For example, if you currently rent out an IP for $30,000 per year, and increase it to $40,000 - a back of the envelope calculation to how it increases your borrowing power is roughly 55k. As mentioned, very rough guidelines to...

Gross yield.

Dave's point is true. I briefly mentioned it on point (e)? An assessment rate is the interest rate that the bank uses to calculate whether you can afford to repay a loan. General rough rule is the higher the assessment rate used by the bank, the less you can borrow from that lender...

Unfortunately not - its a bit complex so I'll have a crack at breaking it down. There is a difference between your 'actual' expense that hits your pocket and the 'assessed' expense that a lender uses to see if your can borrow. For example, if you are trying to take out an interest only...

That's about $3,600 p.a increase in your assessed expenses, reducing your borrowing power by ~$50,000. Similar to a $10,000 increase to your credit limit.

Thanks red liverbird - glad its of some use. Yes raw expenses are treated more harshly. For example, purchasing private schooling at $12000 per year will do much more damage than a $12000 increase to your credit limit. Its because the interest expense is calculated on your servicing...

I've been asked a lot of questions recently about how different types of income/expenses change people's borrowing power. I'm sure other brokers on SS are asked about this too. Some general rules that I like to use are below. Hopefully it's of some use to the SS community. When applying...