Maximizing borrowings

[narcissusford]

Hi all

On my income, I can borrow approx $400k. I have, or will shortly have, $500k cash in the bank.

I wish to purchase a new PPOR for $800k which I intend, after a few years, to convert into an IP.

To maximize mortgage deductions, I want to borrow close to the purchase price of the new dwelling with an IO loan with 100% offset.

Does anyone have any ideas about how I can increase my borrowings in these circumstances?

Thanks

 

[Jamie M]

Hi there

Who determined your max borrowing? A bank or a broker?

If it's going to be an IP in the future, you don't want to use a large portion of your cash now and pay down the future deductible principle. However, you first need to work out a) what your max borrowing is and b) whether you can afford it.

Cheers

Jamie

 

[Rolf Latham]

Hi all

On my income, I can borrow approx $400k. I have, or will shortly have, $500k cash in the bank.

I wish to purchase a new PPOR for $800k which I intend, after a few years, to convert into an IP.

To maximize mortgage deductions, I want to borrow close to the purchase price of the new dwelling with an IO loan with 100% offset.

Does anyone have any ideas about how I can increase my borrowings in these circumstances?

Thanks

Hi

Nothing really obvious based on the limited amount of data we have her............rent the place out for a while maybe.

One thing that is worth looking at, most lenders do lend diff amounts based on their own serviceability models and the products used.

Might be worth a call to a broker if u havent done that yet.

Depending on how u are holding the 500 k at the moment, you may be able to show some income generation on that.

big gap between 400 and 640, but likely NOT insurmountable

ta
rolf

 

[Qlds007]

As the boys have already said impossible to provide a structured responses with limited data.

Irrespective of that and assuming you can get over the borrowing hurdle then why not look at a 100% loan with some of the cash reserves being held as collateral security by way of term deposit. Could still have an offset account for the balance.

 

[Aaron_C]

Agree with what the others have said. Think about it carefully.

 

[Terry_w]

There are a few things you can do to increase tax deductibility in the future. proceed carefully.

 

[narcissusford]

Many thanks for the input. I particularly like the idea of using the cash in bank as security, although as others have cautioned, I will need to consider the implications carefully.

To give you further background, the $400k is a simple estimate based on my income of $100k inc super. I have no debts, dependents or other assets besides the cash in bank. I want to tip all of my cash into an offset account, and obtain a loan of (at least) $640k. When I find the property I want to buy I will speak to a few banks and possibly a broker about the best structure.

Thanks again

 

[Dazz]

When I find the property I want to buy I will speak to a few banks and possibly a broker about the best structure.

In just a few short hours since your initial question, you've had good responses from 4 finance brokers and 1 solicitor.

I think you just completely missed the point.

Contact one of the brokers and go from there.

Speaking to a few banks about the best structure will only get you the best structure for the bank. I presume when you say "the best structure" you really mean the "best structure for you".

If that is the case, start with contacting a finance broker.

 

[BayView]

Also speak to an accountant about the type of loan structure for taxation purposes.

 

[Rolf Latham]

When I find the property I want to buy I will speak to a few banks and possibly a broker about the best structure.

Hi

id get the tax and lending structure product issues out of the way before actually sourcing a property,if you are actually in the market now.

The running around to a bunch of lenders and brokers wont be done in a day or two, and a motivated vendor may not want to wait around while you organise your "stuff ".

In addition, making such decisions is best done while you dont have other pressures like a finance clause over your head.

AND


whatever you do, DONT apply to a bunch of lenders or brokers so they can "properly" assess your numbers. Its the oldest game in the book to attempt to get a level of commitment from you to get a pre approval.

While that is ok for someone that doesnt care about their max borrow cap, the loan type or the issues involved, excess credit enquiries wont help you.

Having said that, at 80 % Loan to value ratio or less the excess credit hits wont likely be as much of an issue as at > 80 % where the lender may apply a tough credit score process.

ta

rolf

 

[narcissusford]

Understood - thanks for the advice.

Dazz, I was not suggesting that I would blindly accept whatever options the banks presented me with. Nor would I uncritically accept the structures suggested by a mortgage broker (they have biases too). I was more interested in exploring options and arming myself with as much information as possible.

Thanks again.

 

[C-mac]

Hi there,

Others have alluded to this on the post already but thought to add some conversation around the use of a mortgage broker.

Brokers aren't for everyone or every situation. However, whilst they don't actually 'maximise' your borrowing capacity/potential (this is something they cannot control and is dependent or your circumstantial situation); they can cross check you across heaps of lenders at once using their software and tell you the lenders who will lend to you, and the maximum amount you'll likely be approved up to; per-lender.

I've written recently about the positives and negatives of using brokers, so you'd need to look at pro's and con's of it (like I do) before making your decision to enlist one. But they could help to unlock greater borrowing capacity.

 

[Terry_w]

However, whilst they don't actually 'maximise' your borrowing capacity/potential (this is something they cannot control and is dependent or your circumstantial situation); [/url]

Hi OM

I must disagree there. Brokers can increase borrowing capacity in a number of ways such as:

1. Choosing which lenders to put the loans to;

2. Choosing which lenders to use early on so that an applicant will qualify later on;

3. Choosing which lender to use because of the LMI behind the lender;

4. Assisting the bank in recognising income and add backs that they may not get at first glance. etc

 

[Rolf Latham]

Hi there,

Others have alluded to this on the post already but thought to add some conversation around the use of a mortgage broker.

Brokers aren't for everyone or every situation. However, whilst they don't actually 'maximise' your borrowing capacity/potential (this is something they cannot control and is dependent or your circumstantial situation); they can cross check you across heaps of lenders at once using their software and tell you the lenders who will lend to you, and the maximum amount you'll likely be approved up to; per-lender.

I've written recently about the positives and negatives of using brokers, so you'd need to look at pro's and con's of it (like I do) before making your decision to enlist one. But they could help to unlock greater borrowing capacity.

www.propertyspectator.blogspot.com

I hear what you say, but the reality in most instances is otherwise.

I will side with Terrie, and will add a structured approach financing a LARGE portfolio will result in + 2- 3 and more ( $x) of rope that a poorly structured portfolio will.

One simple little thing, even on a single PPOR purchase can make for a borrow cap 20 to 30 % greater than some other scenario.

Is that wise, it is in many scenarios and financial stoopidity in others.

And BTW, 99 % of broker software doesnt have enough fuzzy logic to get a look in the door when dealing with any form of multiple loans and securities

ta

rolf