Good to see some different opinions - more please !!! The more discussion the more information is shared.
Would not argue about the use of the information that is available for some groups of the community. There will always be those that will not have the time to use the tools they have.
Increasingly these people will be serviced by a growing army of financial advisors.
Partially at least, one's life is determined by the decisions you do or don't take, perhaps even about priorities - I see it all the time with my clients. Sad people that have innocently toiled for someone else and in the process having ignored their own financial future. Suddenly they hit 45 or 50 and its wake up time, they will be dependent or partially dependent on a government that has less and less to give.
More and more of today's generation will be carrying an extra burden. That of providing for their own future AND that of their ageing parents.
There is a huge difference though about the generation before yours and mine. Quite simply the information was not available to your average person. It was also socially acceptable to be financially complacent, as it was to be a smoker.
Great you have 3 rentals !! I suppose its hard for your then to see your coworkers squander their opportunities.
On the 25 % of rental income issue. You are correct. Some lenders will even take 100 % of your rental income toward serviceability calculations.
Some of the older Debt to Service based Models are that they will take 75- 80 % of your rental income AND allow up to 40 % of that 80 % to be used to service debt. Then they will add a 10-15 % margin to the interest rate, and generally calculate serviceability in P&I rather than I/O, all the while ignoring tax benefits (if any)
In the end on the most conservative models
you are licky to get 25 % of the rental income to be allowed to service debt.
Even on the more modern cashflow based methods where some will allow 80 % of gross rental, they still assess with up to a 37 % rate margin and on P&I not on I/O, so the net effect is a diluted allowance of around
the 50 % mark, some models will go to about the 66 % mark depending on your tax position. My point was simply that you should not run into twouble purely based on "easy lending".
The way I see it variable rates are unlikely to be cut any further. Short term fixed rates have gone up by 25 points in the last couple of weeks. The 5 year rate has increased by 5 to 75 points in the last 2 months. RBA has taken us off the US merry go round at least for the moment. This is not advice
), just a punt, all need to make their own call.