Which lender is best for factoring rental income into serviceability?

[Craig-G]

Hi guys,

I am looking at making the leap to IP 2, however am aware that my serviceability may be tight. I have read a couple of places that some lenders factor the potential rent return from the proposed property at different rates (i.e. most at 80% some more). Just wondering if anyone was aware of a lender that looks favourably on rental returns when doing their calculations.

Cheers – Craig-G

 

[Peter_Tersteeg]

Hi Chris,

IMB has one of the higher renal income percentages at 90% considered.

This doesn't mean they have the most generous serviceability however. Various lenders have different policies on other factors which determine your borrowing capacity. These include things such as:

* Negative gearing taken into account
* Assessment rate (the loan may be 7.5% interest only, but they will probably assess the repayments on 9% principal & interest)
* How are current debts assess (at their assessment rate, or actual repayment amounts, similar to above)
* Will they take bonuses or overtime into account

The list goes on and on...

Figuring out your serviceability isn't something you can do yourself and get a realistic comparison without a huge amount of effort. Call a broker, we have software which can figure out comparisons in serviceability within a few minutes.

 

[Rolf Latham]

Hiya Craig

Adelaide Bank is very kind in its overall assessment of investors with multiple IPs

ta
rolf

 

[malpass]

HSBC take 100% of rental income . Rental can be assessed at 3.5% of property value or by providing rental statements or lease agreement,

Servicing is based on actual rate for most loans and negative gearing is taken into consideration therefore borrowing capacity is higher than most lenders.

However you will not get any brokers to refer you to HSBC as they no longer deal with brokers having sold off their broker introduced loan book to First Mac earlier this year.

Cheers Malpass

 

[HandyAndy888]

I've been very happy with the NAB...

 

[Kristine..]

Hi Craig

The rental income can be taken into account, but there is a lot more to serviceability than one aspect of a borrower's circumstances.

For example, if you hold 20% equity in any other property, it is possible to borrow to 100%LVR for an investment property. For servicing, your lender may apply a DSR for loans above 95%LVR, or apply a DSR across the whole deal.

Some lenders factor the new loan by 10%, others require all mortgage borrowings to be calculated at the assessment rate, etc etc

Serviceability gets very interesting as a borrower expands their portfolio.

By the way, the HSBC model of a generic 3.5% gross rental is equivalent to 80% of 4.5% - but I have lost deals with HSBC because they will not take actual or valued rental, just their own benchmark.

Equally, I had a loan approved this week where the actual rental is $210 per week but the lender allowed the Valuation Rental of $230 per week to be used for serviceability.

We live in interesting times .....

Kristine