Loans restricted by income.

Hi there,

1 problem that i seem to constantly be facing is that the banks wont lend me 80% of my property value. I cant find the answer to this anywhere. The only suggestion is to spread your lending across different banks. I have done this but still cant get 80% on my existing properties or against a new one. This becomes frustrating as i have equity that isnt being used and also it will take some time for my income to increase enough to borrow more.

Please let me know if you guys can help.

Thanks
Regards

Rob.

 

The experienced people here will suggest to you to convert your equity to an income stream to svhieve your objective.

A) Create then draw down a LOC loan on existing equity to 80 per cent LVR and invest the LOC equity it in a income producing share fund and use that income as "proof of regular and enough income" to convince to affordability / servicibilty to banks (or at +80 LVR the LMI insurers).

b) Again draw down LOC on equity and purchase annunity income to do above, absorbing the cost between loan cost and annunity return interest as a cost of business to get the larger appreciating real estate investment over > x yrs. Note , whilst LOC itself will give ability to service against appreciating asset, it will not convice a lender or LMI as it is not income.

 

Thanks MAV!

Appreciate the reply. At the moment i have LOC already setup. 1 personal and 1 investment LOC both with ANZ and currently sitting at 80% lvr. I did have a LoDoc 60 with anz as well but recently went through a broker who got me a loan with westpac with a lvr of aroudn %68. if i could get the westpac loan upto 80% and then next property i buy at 80% i would have more than enough money to purchase the next property.

I like your idea of putting any spare money into shares. even if you were to put $100,000 into a conservative blue chip banking share, you would only be returning a dividend of around 5% or $5000. $5000 extra income before tax wouldnt really give me much more borrowing power.

i dont really want to sit waiting for my salary to go up as well as rentals.....enough to get another property. this time waiting means values will go up etc.....

any other thoughts?

thanks again

 

Blkr this situation is where some people will buy into income producing managed funds such as Navra which pay a higher % of income than a direct share would, because they trade instead of buy and hold.

 

Its not clear whether your stuck at 68% LVR with Westpac due to servicibility or postcode issues.

However another option maybe to see if you can get an existing LOC with a more flexible ANZ lender to 90% or both to 85% if necessary - (Westpac do an 85% with no LMI ), if they are in safer LMI postcodes and I am assuming the ANZ are not cross collaterised. The extra 10% across your portfolio x 3 properties is effectively taking your 68% to 78%. Yes you will pay LMI, however of course it is tax deductable when used to gain an incoming producing asset and the capital growth in the property asset you buy in a growth area will outstrip the LMI (the cost of business) in the first year(s).

Also look at Cash Bonds - Somersoft Property Investment Forums