Borrowing Power with Dependents and a single income?

[dammit]

This question is probably more geared to the brokers but I thought it's worth posting publicly for the benefit of all.

I'm hoping someone can comment on whether it would be worth trying to get finance to upgrade to a larger PPOR or if the bank sees our application with our new financial situation they might want to take our current house away (Ha! I hope not).

We bought our own PPOR 2 years ago. We paid $350k and its current value is $350k. We owe $300k on the loan. So I guess our LVR is ~85%.

I earn $80k pa.

Now for the things affecting borrowing power:
We have 1 dependent (2 yo baby) and another baby on the way.
Wife earns $0k pa. ($5,200 pa net income family tax benefits though).

Some borrowing power calculators say we could get more, others don't even display a figure equivilent to what we already have debt wise (scary).

We are considering upgrading our PPOR, e.g. selling current house and buying a bigger one. The ones we are interested in are $440k (another $90k above our current house value). We never have any trouble meeting the mortgage at all (hence why we are well ahead of our planned repayments).

Is it worth applying/pursuing finance? Or given the sole income + dependent(s) on the way we will come up in the red/declined?

No other personal loans, credit cards and no blemishes on the credit record. Family are a $50k guarantor on our current loan (we did this to avoid LMI). It's a catch 22 I guess, as you grow your family you need bigger space to live in which costs more yet harder to get finance/money because your income drops for a little while. How do others cope?

 

[Aaron_C]

It will be tight, particularly if you include the soon-to-be-born child, there's no question about that. If the family guarantee is involved again that doesn't really change things from a servicing part.

 

[K_Raheja]

This question is probably more geared to the brokers but I thought it's worth posting publicly for the benefit of all.

I'm hoping someone can comment on whether it would be worth trying to get finance to upgrade to a larger PPOR or if the bank sees our application with our new financial situation they might want to take our current house away (Ha! I hope not).

We bought our own PPOR 2 years ago. We paid $350k and its current value is $350k. We owe $300k on the loan. So I guess our LVR is ~85%.

I earn $80k pa.

Now for the things affecting borrowing power:
We have 1 dependent (2 yo baby) and another baby on the way.
Wife earns $0k pa. ($5,200 pa net income family tax benefits though).

Some borrowing power calculators say we could get more, others don't even display a figure equivilent to what we already have debt wise (scary).

We are considering upgrading our PPOR, e.g. selling current house and buying a bigger one. The ones we are interested in are $440k (another $90k above our current house value). We never have any trouble meeting the mortgage at all (hence why we are well ahead of our planned repayments).

Is it worth applying/pursuing finance? Or given the sole income + dependent(s) on the way we will come up in the red/declined?

No other personal loans, credit cards and no blemishes on the credit record. Family are a $50k guarantor on our current loan (we did this to avoid LMI). It's a catch 22 I guess, as you grow your family you need bigger space to live in which costs more yet harder to get finance/money because your income drops for a little while. How do others cope?

Is it possible for you to get a job which pays more than $80k ?
also, how come after 2 years ur house value is still the same as what u paid
can u add/cosmetic/minor renos to increase value of ur current house ?
we added a second toilet and that helped us a bit when we revalued our ppor when buying our ip.

 

[ZachAnSel]

Whatever you decide at the end of the day, get free full valuation upfront for current ppor. From there combine with your income and current saving level, good broker should able to determine your serviceability without affect on your credit score.

 

[Shahin_Afarin]

You will be able to borrow high $400's with at least 3 lenders so servicing is not an issue and this is including 2 dependents.

Regards

Shahin

 

[Aaron_C]

You will be able to borrow high $400's with at least 3 lenders so servicing is not an issue and this is including 2 dependents.

I don't see how Shahin - on a PAYG 80k pa with effectively 3 dependents for a OO loan. This will be tight even on $350k.

 

[Rolf Latham]

I feel you have answered your own question

As further verification have a bo peep how much you are saving, OR outting away extra a week.........

Are you paying IO or PI?

t
arolf

 

[dammit]

Thanks everyone for the replies so far. Here are answers to some of the questions that popped up:

My income won't be increasing above 80k for at least the next 12 months.

House values have stayed stagnant for the past 2 years so no capital growth. We can do some minor changes but theres nothing that will add any value (the house was a new build).

Currently paying Principle & Interest.

At the moment we are saying about $250 a week after all mortgage, bills, living expenses are paid. Net income $1300 p.w. minus all expenses = $250 surplus p.w.

 

[Shahin_Afarin]

As mentioned before 3 lenders will lend on those numbers - the other thing you need to consider is the LMI conditions since your LVR is over 80%. For example, if you just started your employment then this is a big problem. So you need to address these conditions/policies.

Regards

Shahin

 

[Daniel121]

...as you grow your family you need bigger space to live in which costs more yet harder to get finance/money because your income drops for a little while. How do others cope?

Are you sure you have to buy another house for bigger space? Regardless whether the bank will lend you money or not, replacing your house WILL cost a lot of money (stamp duty, buying & selling cost..etc). How about *creating* more usable space from your existing home? You said it's a new built, so I guess extension may not be possible, but there must be some way to get more space, like converting garage to a room, re-organising furniture, bunk bed for kids...

Some people are making the most out of the sqm they've got...like this
https://www.youtube.com/watch?v=9nljmEUeLbY

 

[evisional]

Is it possible for you to get a job which pays more than $80k ?
also, how come after 2 years ur house value is still the same as what u paid
can u add/cosmetic/minor renos to increase value of ur current house ?
we added a second toilet and that helped us a bit when we revalued our ppor when buying our ip.

Did you see house price drop in the last 2 years?

 

[Angel]

Congratulations on your great budgeting skills.

May I add that you do not need a bigger house, you think you would like a bigger house. A two year old does not need a room of his own, how do you think us oldies managed to repay our PPOR within ten years in the olden days - last century. We lived in smaller houses than what people consider normal these days. Millions of people live in a small house, you will be fine. When you add up all that stamp duty, legal fees, agent's fees and removal costs, ask yourself if it is worth it to get a bigger house just yet. You could take your family to Europe for two months for the same $$$$, or pay cash for two nice cars.

 

[joanmc]

I am with Angel on this, little kids take up hardly any room and the way you are going you could have a great deposit for an IP soon if you stick it out where you are. If you can gut it up a bit longer and put your extra $$ in an offset maybe turn this PPOR into a rental and find a bigger PPOR in a few years.

 

[cimbom]

I agree with the last two posts. I haven't seen many new builds that are less than 3-4 bedrooms anyway. Kids don't even notice these things. I think the money you're putting away will give you more than a bigger house will.