Serviceability is stopping me

[quoll]

Two other options.

1. Sell something (generally the worst property you have)
2. Wait until income (rents, job pay, other) increase enough

Don't rush into things.

Even if you find neutral props the banks only take 75% of rent into account for serviceability. So you really need + property and well + not just there.

Regards
Graeme

 

[Token Funder]

My actual question is: given this situation, the repayments (even allowing for rent) would kill me.

Question answered.

 

[grossreal]

hi all
as rixter has said you can use bank bonds to leverage to gain a income stream and yes it is a very succeful way of doing it
and no you can't post leverage or amortised bonds
as in australia you are not allow to advertise this form of investing.
but the simple answer is that you can use bonds and amortised bonds to then be used to show serviceability and the bond ios then the income and does not require the bond holder to show any form of serviceabilty at all as the income is bond generated
and do most banks acceot bond generated income
yes they all do as its the safest form of income generation.
they have the bond and also they have the income from that bond.
the ones that I do are a bit different to an equity bond and are a direct investment bond
and amortised is alot higher gearing
but in essance yes using bond does get you over any form of servcieablity requirement a 1.25 mil bond is a 165k income
and 165k at 4.5% cover 3.666mil debt
at 7% covers 2.357 debt
if you were to cover the 1.25mil at 7% thats 87.5k x 1.4 thats 122.5k and your income is 165k the banks happy.
and you need no income at all
the bond is the deposit and it then shows serviceability and also is then the security for the loan.
the income tkes the coverage to 2 or 2.5 times
and the bank requires 1.2 times

 

[evisional]

Cashbond!!!

Can I know which cash bond you bought?

I see two types of Annuity in the Challenger website: fixed term and life time Annuities. Which one should I buy?

What the term (i.e. 5 years) of cashbond so that the bank counts the income? can I buy cashbond 3 years to proof as additional income?

SR this is another option I have used to get around banks serviceability issues in the past. It maybe of interest to you.

I have used a Cashbond/Annuity to keep purchasing IPs. I used it in conjuction with my CGA Strategy -
..

For example if you purchased a $100,000.00 cashbond over a term of 5 years, each year you would get $20,000 plus interest paid back to you. Now when you go to the bank for a loan to purchase your next property you can show 100% of that $20,000 income on the INCOMES side of your loan application on top of your existing Payg Income & all your other rental incomes...In other words You have effectively increased your borrowing because you have an extra $20,000 income in the eyes of the banks. Pretty neat hay

You can also use that cashbond income to service your portfolio holding costs as well.....this giving you sleep at night factor knowing you can service the debt comfortably.

 

[Rolf Latham]

Can I know which cash bond you bought?

I see two types of Annuity in the Challenger website: fixed term and life time Annuities. Which one should I buy?

What the term (i.e. 5 years) of cashbond so that the bank counts the income? can I buy cashbond 3 years to proof as additional income?

do you REALLY need to go down this track

I have found many times that there are simpler and more "fuel efficient" ways of achieving serviceability issues if the portfolio has been well structured

t
arolf

 

[boomtown]

Seriously.

If the bank says you can't afford it, guess what, you can't afford it.

 

[Rolf Latham]

Seriously.

If the bank says you can't afford it, guess what, you can't afford it.

Thats as blanket a statement as saying debt is good or debt is bad.

Its not that simple

The converse would be that if the bank says you can afford it , you can, which often is not true

Deemed lender and actual/personal serviceability can be hugely different, just as one family on 150 k a year cant rub 2 bob together yet another has built a net worth in the millions with exactly the same physical resources.

ta
rolf

 

[boomtown]

The amount that the banks are willing to lend is staggering in my experience. I have been happily offered up loans where the repayments equate to more than 75 percent of my take home pay. The exposure on interest rate movements on a variable rate is obvious.

And people come onto this forum in an era of unusually low interest rates with a potentially high impact inflation event around the corner (the carbon tax) saying they are struggling with serviceability. Well in that case if they take out another loan and interest rates move against them then they will be in the deep end and complaining about predatory lending. You can lock the rates but that comes with its own risks.

Sure it is a sweeping generalisation. But I view cashbond structures as just a financing trick like cross collateralisation as a way for the brave / foolhardy to truss themselves up and get caught when their underlying assumptions do not pan out. The only exception would be those with very high equity But property remains illiquid in a financial crisis as we saw with the GFC.

 

[Rolf Latham]

And people come onto this forum in an era of unusually low interest rates with a potentially high impact inflation event around the corner (the carbon tax) saying they are struggling with serviceability.

I get your point.

I digress

But the government said the inflationary impact will be minimal and those that need it will be compensated.............

The same gov said businesses that are affected can just pass it on...........so obviously it will all go away

ta
rolf

 

[boomtown]

Its well known that people like myself are so full of hot air that we will pay a dispoportionately high burden of the carbon tax.

 

[nicson]

lol boomtown. Just imagine the tax bill comming out of Parliment then!

 

[see_change]

Its well known that people like myself are so full of hot air that we will pay a dispoportionately high burden of the carbon tax.

Love it ..

Anyway , back to cash bonds . The first person to propose their use on this forum was Steve Navra. Google him.

Cliff