Help with my risk factor - Should I buy or not?

[Aaron_C]

With one income, not all banks would give us loan now. They consider the full liability for our existing loan even though it is 50:50 ownership. Apparently only few banks take only 50% of loan into their calculations. So I can understand what you are saying.

It's a very important policy, makes a world of difference.

 

[devank]

Most people want to buy more IPs; and they are usually hampered not by their LVR but by their Servicibility...

I'm kind of ok with that. Under normal employment conditions if banks think that we can't service then I don't want to go beyond that either.

On a sidenote, i think buying 1 IP every year or every two years is a good strategy...be bold

Yes.. Two years kind of enough time to settle things down and also improve the rentals so we can afford another. What do you mean by 'be bold'?

The analysis would certainly be very different if you were neutral or positive cashflow, but the criteria under which lenders assess risk make the cashflow positive caculation to be come into effect when the rental yeild is about 12%.

We are only about 8K negative geared. Also we are aiming for slightly positive next time.

From a lenders perspective, 4 properties are definitely a higher risk than 3.

You're married. Regardless of your ownership structure, the banks will assess you as a couple and given your wife isn't working she'll be classified as a dependant. You'll be assessed on the full loan amounts and 100% of the rent will be taken into account.

Is this the same with all major lenders including Maq. Bank? I thought they take only a percentage of rent.. why is it 100%?

 

[Aaron_C]

Is this the same with all major lenders including Maq. Bank? I thought they take only a percentage of rent.. why is it 100%?

Most take 80% of your rental income for servicing, some take 100%. 80% is probably more accurate I would say. Macq is 80%.

 

[matto_]

One IP every 2 years fits well with our plans. Would you take a bit of risk to stick to your plans?

.

As with everything - DEPENDS.

Depends on how important your plans/goal is and whether or not you are willing to take on a bit of risk etc in order to meet/get to your end game in the required time.

Depends on how much extra time you are willing to take to get to that point of FI.

Have been reading MMM (Mr Money Mustache) of late and am really sold on the concept of making sacrifices, taking on risk early in order to bring the date of FI forward.

 

[Peter_Tersteeg]

Is this the same with all major lenders including Maq. Bank? I thought they take only a percentage of rent.. why is it 100%?

What I meant was they'll look at all the rental income (not just half of it in some joint ownership scenarios), then apply their own policy to that rental income. In most cases they would only use 80% for servicing purposes.

If you owned a property 50/50 with a friend and they weren't in the next deal, most banks would only use 50% of the rental income, then take 80% of that, so only 40% of the total income would actually be used.

There are some lenders who are a bit more generous and will use all of the rent in their affordability calculations.