What Happens Next?

From: Simon and Julie M


Hi Everyone
We have 7 rental properties in the ACT which we have accumulated over the past five years.
We had enough Equity and income to take us this far and would like to keep accumulating cash flow positive properties forever. The problem we are facing is the bank does not see what a wonderful idea it is and are saying we need more personal income to support our habit. This defeats the purpose of the exercise in our case for we would like to decrease our personal income and increase the passive.
Should we get into a Business as well to increase our cash flow?
Flip some of the Properties?
Does any body out there have any suggestions?
Your experience will be greatly appreciated.
Regards Simon
 
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Reply: 1
From: Keith J


The way CommBank works out the servicability is they take 70% of the rental income and subtract it from the interest payable. Additionally your personal income must be below 35% of the remainder of your interest payments.

Most others add 70-100% of your rental income to your personal income. Then they take 35%(ish) of that total and use it to service the interest. So it ends up as 35% of 70% of your rental income being used to service your IP debts.

So the bottom line is - does 70% of your rental income cover all the interest ? If so then refinance with CBA. Bear in mind that CBA will only allow a max 3-4 IPs before you are treated as a commercial customer.
 
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What Happens Next? (oops)

Reply: 1.1
From: Keith J


Oops. Instead of

Additionally your personal income must be below 35% of the remainder of your interest payments.

I actually meant -

Additionally, the remainder of your interest payments must be less than 35% of your personal income.
 
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What Happens Next? (oops)

Reply: 1.1.1
From: Dave Tot


Have a chat to a mortgage broker
(Rolf is one who posts here)
they have loads of diff lenders that can take over where your previous ones have given up...

drop him a line and have a chat.
 
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Reply: 2
From: D R


HI Simon,

It's all about getting the right players on your "team". Your banker is one of these and probably the most important. For what its worth, I am from Canberra and would like to help out if possible.

Send some mail if your interested to

darrenr@dynamite.com.au

Cheers


DR
 
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Reply: 3
From: Rolf Latham


Hi Simon

Get youself an indpendent broker rather than trying it yourself, running around to say 20 lenders can be done in half an hour.

Ta


Rolf
 
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Reply: 3.1
From: Simon and Julie M


Thanks for the input everyone
this forum is the next best thing to finding a bargain property.
I sat down and did some figures today and worked out that in our case the Com bank( I think)have been using a formula of 80% of our total income(rent + personal) and 30% of that is the serviceability barrier for the loan interest @ 2% higher than current rates. I could be wrong but that may work well for a one off home loan but not for my situation.
I'm off to the bank again tomorrow in the hope of greater understanding of their current formulas(I think they changed to this way late last Year).
We managed to get our last loan approved but
where told we had plenty of equity but rent reliant.
Things looked great when I applied Keith's first formula to our circumstances so we will continue the learning curve.
Thanks again all
Simon
 
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Reply: 3.1.1
From: Simon and Julie M


We live and learn!
I came away from the Com bank today with this formula for serviceability on investment loans

Monthly loan repayment + (2%(because one of our loans is a LOC))
MINUS
70% of monthly Rental income
divided by
Gross monthly joint personal income
EQUALS
must be less than 35% gross personal monthly income.
(NOT WHAT I THOUGHT EARLIER)
Sorry if I caused any confusion
I've still got my "L" plates on.
regards Simon
 
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Reply: 3.1.1.1
From: GoAnna !


And even that 35% is flexible. I think we are on well over 40%.

That formula means that you are rewarded for cash flow properties. As you should be.

GoAnna !
(aka Anna before she got real)
 
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Reply: 3.1.1.1.1
From: Gee Cee Cee


Hi Ya
I was re-financing a block of townhouses & a block of units few mths back. Commonwealth wanted it set up as a commercial loan. P & I over 10 yrs at a rate above the market.

You can imagine what I said FFF @##@$%$#&*&$#@ & How am I going to eat for 10 yrs as well.

Ended up doing great packages with ANZ & National instead.

Happy loan hunting,

Gee Cee
 
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