Borrowing capacity - equity and loan amount

[fxag]

Hi all,

I have questions in regards to the plan of buying more IP's and borrowing capacity.
Will borrowing capacity be the limit of banks or financial institution can give the loan to us, assuming equity is not an issue.
I wander how some person would be able to have tens of IPs, he/she would have a very high income if the bank/financial institution requested a borrowing capacity for the amount that he/she borrows.

Thanks for your helps

 

[Peter_Tersteeg]

The bank needs to be able to verify that you can afford to repay the loan, this is reliant on income.

Equity is important as this can help with having enough security for the loan, but income is another component.

When people purchase multiple properties, the rental income from those properties are contributing to their income which increases their borrowing capacity. Certainly a high personal income is very useful, but this is not the only source of income that can be used.

We've quite a few investor clients who earn more money in rent than they do from their jobs (keep in mind they usually have large amounts of debt as well).

Keep in mind that lenders have different policies regarding how they assess your borrowing capacity. This means the results can vary significantly from one lender to another. Some lenders can be very conservative and may not be willing to lend you any money at all, whilst others might lend $1M or more.

There's no single answer to everyone's circumstances, you need to consult a broker to get the right advice for your own position.

 

[Jamie M]

I wander how some person would be able to have tens of IPs, he/she would have a very high income if the bank/financial institution requested a borrowing capacity for the amount that he/she borrows.

You don't necessarily have to have a really high income (it does help though).

Having a portfolio that's not hugely cashflow negative helps - so does loan structure and lender selection.

Cheers

Jamie