Too rent reliant

From: Always Learning


Members,
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I was interested in a comment by Steve Navra in his "rental reality" posting.
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1) How far can one progress, before serviceability runs out? (Based on one’s personal income level and up to the point where banks start saying you are ‘too rent reliant’.)
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IMO banks never say "too income reliant" in determining you serviceability level. Could you imagine asking for big bank for a loan and they decline as you depend completely on your job for income; "too income reliant"?
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What is "too rent reliant" from the bank's point of view? At what point of (rental income, salary income, equity level) could this be a concern for me?
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Reply: 1
From: Rolf Latham


HI AL

Rental reliance = cop out

def.

Commonly used where lender or more usually mortgage insurer needs some plausible excuse to decline the loan.

Only one lender (ANZ) actually provides a fixed formula for working this out. Mortgage insurers get very "rent reliant" nervous if you need more than 50 % of the rental income to service the loan - even at 85 % LVR if its a + 500 k loan.

Ta

Rolf
 
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Reply: 1.1
From: Kevin Forster


Rolf

Is the bank more likely to use the rent reliance excuse if the total LVR is greater than 80%? I was wondering if it's one of the banks ways of saying pay down some debt and then we'll talk again.

Kevin
 
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Reply: 1.2
From: Owen .


I recently butted heads with a bank lender over this issue and pointed out that the unemployment rate was 7% and the vacancy rate was 3.5% and asked which source of income he thought was more stable? I also pointed out that even unemployed people have to live somewhere.

I got the money!!!

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 1.1.1
From: Rolf Latham


Hi Kevin

You are 110 % right.

A mills exposure and a lot start talking 75 % and less for the whole portfolio !

Makes for interesting times whn you get above those dollars and you want to buy your next property

Ta

Rolf
 
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Reply: 1.2.1
From: Steve Navra


Hi Owen

That is VERY good,

Can we all use it!!

Regards,

Steve
 
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Reply: 1.2.1.1
From: Steve Piggott


Have'nt posted here for a while now so Hi to all.
The rent reliant issue.
What is the bank doing?
Are they not renting themselves?
Do not they rent out money?

OK how to beat this.
Multiple lenders and multiple entities.
( company/trust and combinations )
Use 70%LVR NON-RECOURSE lending.
this doesnt show on credit report.
I know this works coz i'm doing it
I have 6 figure debt and my personal income is sub 30k.....tax effective and safe.

hAPPY INVESTING

nEB :)
 
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Reply: 1.2.1.2
From: Owen .


Feel free to use it Steve. Happy to provide you with some information you can use instead of the other way around.

I also like the Robert Kiyosaki technic of dealing with a lending manager although I haven't used it myself. When a banker is resisting lending you more money point out that all the loans you have are earning the bank money and that the bankers salary is costing the bank money. RK's method of explaining this to the banker was to look him in the eye and say

"Me asset - you liability"

Classic stuff.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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