Basic question:

[mary&mat]

Hi all,

Have searched, but to no avail...is this the correct way of working out how much I can borrow:

Loans: 1,049,000
Current value of properties: 1,510,000
Current LVR: 1,049,000/1,510,000 = 69%

Assuming bank will lend 80%:

0.8*1,510,000 = 1,208,000
Minus current loans: 1,208,000-1,049,000 = Bank lend 159,000

Does this mean I can put this amount in a LOC & go to another bank & get a loan for another property using this as a deposit?

Thanks

Sorry for the basic question

 

[alexlee]

If you find a bank willing to do 80% LVR loans without a serviceability assessment at anywhere near decent interest rates, tell me.

 

[The Y-man]

Does this mean I can put this amount in a LOC & go to another bank & get a loan for another property using this as a deposit?

Thanks

Sorry for the basic question

Yes but as per Alex's post - assumes you have serviceability AND that you don't hit the lenders maximum exposure limit.

The Y-man

 

[Rooster]

Yes, that's correct.

Assuming you meet the bank's serviceability requirements, then you could drawn down a LOC on that equity and take it to another lender as a deposit.

Cheers

Rooster

 

[cmason]

I'm not sure about setting up an LOC which involves more than one property as security. The way I have recently done it is to take the deposit/buying costs LOC out against one property, as the more properties you involve the more valuations required, spose it's possible just more hassle especially if your lender charges for valuations.

Then found the property used this LOC for 20% deposit and buying costs then got a loan with a different lender for the remaining 80%

 

[mary&mat]

Thanks alexlee & Y-Man, Rooster & cmason

What is the 'lenders maximum exposure limit'? What does this mean?

Oops, cancel that question, just googled & have my answer!

 

[sash]

The amount you have calculated is the amount of equity you can potentially draw out.

Also bear in mind, if you are cross collateralised the bank may refuse to allow a drawout if the properties don't value up to what you expect.

Secondly, as others have pointed out serviceability is key to a full doc loan. You may find the low doc loans may offer more finance. Bear in mind even these now consider serviceability....though some are not as stringent.

You may need to shop around for the best product for your situation.

Hi all,

Have searched, but to no avail...is this the correct way of working out how much I can borrow:

Loans: 1,049,000
Current value of properties: 1,510,000
Current LVR: 1,049,000/1,510,000 = 69%

Assuming bank will lend 80%:

0.8*1,510,000 = 1,208,000
Minus current loans: 1,208,000-1,049,000 = Bank lend 159,000

Does this mean I can put this amount in a LOC & go to another bank & get a loan for another property using this as a deposit?

Thanks

Sorry for the basic question

 

[mary&mat]

Thanks Sash!

Am almost back at work so servicability should be ok again...we've coped on one wage the last 2 yrs I"ve been off (thanks in part to capitalising interest & rent monies helping us live).

So now we can look at moving forward again on two wages (minus childcare fees ;( )

If anyone has any pointers / things to watch out for on our continuing investing journey, please feel free to share

 

[sash]

A couple of pointers:

1. if all your properties are in Melbourne push the rents up every six months...this helps cashflow and your serviceability.

2. If you loan allows set-up a a 100% offset where all your pay goes into. The use a credit card as much of the purchases as you can and pay it off in full at the end of the month. You need to be really disciplined to do this. But over time the interest you save is huge and you pay off capital. It is also a great way to earn points. For example I have the dual Gold Amex/Mastercard. I put most of my purchases on the Amex as I earn 2 points....if you spend say $32k on the card and say you paod $30k of it with Amex...that works out to 60k points. I had 115k points which paid for 50% of my Bali accomodation

3. Get your accountant to fill a Tax Variation form if you get money back every year. Instead of waiting till the end of the year....this way you get the amount progressively every month rather than at the end of the year. Use this extra cash to reduce debt.

With exception of number 3 I use the other two very effectively. I can't use 3 because I am positively geared and usually give the tax man money back...as a matter of fact he has put me on a $800 per qtr provisional tax.

Thanks Sash!

Am almost back at work so servicability should be ok again...we've coped on one wage the last 2 yrs I"ve been off (thanks in part to capitalising interest & rent monies helping us live).

So now we can look at moving forward again on two wages (minus childcare fees ;( )

If anyone has any pointers / things to watch out for on our continuing investing journey, please feel free to share

 

[mary&mat]

Wow. Thanks heaps Sash.

Really appreciate you taking the time to share

 

[ashalim]

Sash,

I'm doing all your points (except I'm based in Sydney and I'm negatively geared). It's nice to have an experienced investors confirming that i'm doing the right thing

accrued 9000 pts from the amex since Oct 2010 hehe

 

[The Y-man]

What is the 'lenders maximum exposure limit'?

We found each lender has some seemingly arbitrary (I am sure there is some complex risk management algotrithm!) ceiling on what they will lend you regardless of what your serviceability is etc...

The Y-man

 

[Marty McDonald]

It's about $2 to $2.5 mil although haven't tested it for a while.

 

[Anh]

I recently found that using offset (100%) is cheaper than having a LOC (0.1% more expensive than other loans)

 

[Rolf Latham]

We found each lender has some seemingly arbitrary (I am sure there is some complex risk management algotrithm!) ceiling on what they will lend you regardless of what your serviceability is etc...

The Y-man

not much is arbitary

there are good(?) stats behind most lenders decision flags

Exposure comes down to a bunch for things with Loan to value ratio being at least one very important one.

If you are borrowing more than 80 %, typically 90 or so, then the max comfy limit is near the 1 mill mark. Sure the typical notional max exposure for an LMI provider is 2 plus, but the reality is after 1 mil youd want very very solid income and other plusses to go with the deal.

Some lenders use more than one LMI provider and that can be a good advantage.

On our business, we suggest that an average borrower is well served with 1 mill exp per lender.

Obviously NON average borrowers can run to 5 or 10 mill because there arent enough lenders around to spread it much more thinly

Some argue to keep piling the deals with one lender until that lender says no more..............for increased rate discount and easier loan approvals etc. Its a good theory, until you get told NO, and then it can be a 6 to 12 mths plus recovery until u have excised enough equity to go again

ta
rolf

 

[mary&mat]

Thanks again Y-Man, Anh, Marty & Rolf.

My quick googling said $2-2.5M was a rough figure for CBA (I think).

Another said only $1-1.5M.

Once again, thanks for your advice