newbie help again please

[WebBoard]

From: Kevin Fielding


with reference to the replies to my previous post - many thanks.
but i am a little confused.
Some advise that i can borrow enormous amounts of money to fund i.p. where others advise against this as i may not be able to service the loan.
with my income of $45,000 and an outstanding mortgage of $40,000, what would be my limit for a loan to fund an i.p.and still be able to live (wife earning $6,000 and two dependent children)?

your advice will be much appreciated,
Kevin

 

[Les]

Reply: 1
From: Les .



G'day Kevin,

There were certainly a lot of opinions presented to you - no wonder you were confused. By the way, none that I saw were wrong, but some maybe didn't tell the WHOLE story.

Re Banks - they want to know LVR and DSR. A number of those replying mentioned your great equity situation and talked of only the LVR side (e.g. "you can afford around 9 deposits of 10% with that")

On the DSR side, you have to be able to REPAY the loan - and that's where others have stepped in to give you the other perspective.

You say, Kevin, that you can only afford around $118k based on your wage, and your current loan. You have the actual numbers, and they sound right...... I got $176k, ($150k divided by 8.5%) but I hadn't factored in your home repayment.

BUT,

1. I bet the loan on your home is P&I - thus, your monthly repayments will significantly affect your borrowings. Try doing the numbers using I/O and see the difference.

2. To have your loan down to $40k on a $350k house, you have probably paid far more than you needed to - which means you COULD afford to pay more per month (even if it had to be a no-Doc loan).

3. I bet you haven't factored in the Income you will receive from this new property - you are looking at borrowing to invest, and you are calculating to see if you can pay a mortgage to get it - now, add in the expected rent (or 75% of it, for the Banks) and see what amount you can borrow now.

4. If your home loan were paid out, what would THAT do to your borrowing capacity figure?

Try those, then see where you are - keep in mind that Rolf, for example, would be one of the most knowledgeable in this area, and would be worth contacting to get absolute clarification (and even a mortgage, or two, or three .....)

Let us know how you went with the above, too, Kevin - did it help to clarify things for you?

Regards,

Les


- "Eschew Obfuscation" - ;^)

 

[gailh]

Reply: 1.1
From: Gail H


Kevin,

See my further post in the last thread. I absolutely endorse what Les has said, and I recommend a chat with Rolf. He is knowledgable, helpful, and he will not try to push you into anything.

Good luck

Gail