# How much can I borrow

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From: Toyo Spares

Ok, time for a newbie to take the plunge and buy a first IP.

Assuming the following factors -

LVR kept below 80%
DSR kept below 30%
rental return of 7%
bank estimate of rental return approx 5% (is that a reasonable assumption ?)
costs = 10% of purchase cost
equity in current owner occupied property = \$120k
PAYG income \$80k p.a. with a 48.5% marginal rate
deposit = zero

How do I calculate how much can I afford to borrow for an IP ?

i.e. to work out the weekly repayments I have the PAYG figures but I need the rental figures. The rental figures are a % of the IP value but the IP value can't be calculated until I know the loan amount.

I'm sure a few simultaneous equations would figure this out but, their must be a few rule of thumb/assumptions to make rough estimates.

Toyo

Last edited by a moderator:
From: Rolf Latham

Hi Toyo

I suggest you find yourself an independent mortgage broker you feel ok with and run the options. The answer to your question can vary by plus or minus 200 k depending on many things the least of which may be your income (surprisingly !)

Ta

Rolf

Last edited by a moderator:
From: Ian Findlay

Your costs at 10% seem high, we use the calculation of 4.5% although make
sure we never pay establishment costs etc. We are QLD based so the main cost
(stamp duty may be different in other states).

Your % rental also seems a bit low, try for 7.5% upwards.

If you borrow upto 80% of the total of your owner occupied property (you
don't say what its value is), you can use this as a major deposit for your
IP. Be careful not to borrow more than 80% of the IP or you'll get slugged
with lenders mortgage insurance which can be a big no no depending on how
agressive you want to be.

You'll also want to reduce your tax burden so think about something
reasonably new say around 5 years old. I believe that younger property is
overpriced because investors want to maximise tax benefits rather than
concentrate on rental income and growth.

Ian

>
> Ok, time for a newbie to take the plunge and buy a first IP.
>
> Assuming the following factors -
>
> LVR kept below 80%
> DSR kept below 30%
> rental return of 7%
> bank estimate of rental return approx 5% (is that a reasonable assumption
?)
> costs = 10% of purchase cost
> equity in current owner occupied property = \$120k
> PAYG income \$80k p.a. with a 48.5% marginal rate
> deposit = zero
>
>
> How do I calculate how much can I afford to borrow for an IP ?
>
> i.e. to work out the weekly repayments I have the PAYG figures but I need
the rental figures. The rental figures are a % of the IP value but the IP
value can't be calculated until I know the loan amount.
>
> I'm sure a few simultaneous equations would figure this out but, their
must be a few rule of thumb/assumptions to make rough estimates.
>
>
>
> Toyo
>
>
>
> To start a new topic: mailto[email protected]
>

Last edited by a moderator:

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