Serviceability

Hi -

I was hoping to get some advice on serviceability structures? I have just started building an investment portfolio, and was wondering on some ideas/tips on setting up ways to keep my serviceability in tact when borrowing for future properties. Looking to purchase within the next 6 months, so would like to put some practices into action? Any advice or recommendations would be greatly appreciated.

Cheers

Dont purchase any propertys half share with someone other than your spouse if you can avoid it. If there is a mortage over the other persons half you will be assessed as having the full mortgage but only recieving half the rent....

Im not sure, but say if you have any money in an offset, coudl you put this into a high interest savings account for 6 months, as your monthly repayments would be the same (as viewed by the bank, even if its an IO) and you would have extra income.... Maybe a MB could clarrify this one. It will cost you more for the 6 months but if your servicibility is that tight it might get you over the line (but id imagine in todays market any deal that has any question mark around it would be getting knocked back)

Credit cards and personal loans are killers when it comes to servicability - get rid of any credit cards you don't need, lower the credit limit on those that you do, and have 6+ months of evidence that you pay off your credit card in full at the end of each month to show that you don't pay any interest. It really helps.

Personal loans and car loans (and car leases too) are very costly too - get rid of them as soon as you can to maximise your servicability.

Thanks for the feedback!

At the moment, we have no credit card loans or car loans.

We only have 1 income at the moment. We have some available equity currently, and we'll be looking to re-value a couple of IP at the end of the year to help the cause in moving forward. We are just in the process of purchasing an another IP now, but I know our next will be harder as we are stretching our only income in the serviceability criteria to the max. So we are trying to get ahead of the game. I guess we are needing some creative advice that we could put in place now, so we'll have some additional income to show down the track.
Cheers

The other income could do some personal services work for someone. Say you could get someone close to you with IP's to hire you for bookkeeping etc and pay you. They would have a invoice that would be a tax deduction for them. You would have assessible income but since there is no other income (assuming) you would pay no tax on this money however no money needs to change hands. Id imagine they would only take that if it was on the last years tax return, however it could give you some money.

It may affect centerlink benefits so you would need to consider all the facts before you did anything....

Ill stop thinking of extreme situations now...

Hi.
Just a few thoughts:

... switch any Principal & Interest Loans to Interest Only (including PPOR - you can usually still pay off some principal each year)

... get a good mortgage broker - even ask a few different brokers to source best loans for you

.... consider getting an ABN as many lo-doc loans require this. It is not difficult and can be done on line, and can be handy for any future business you may be planning eg. property investment

.... don't be scared to change lenders, although refinancing existing loans may cost more than the exercise is worth

... if all properties are tied up with one lender who is tightening the purse strings, and if there is some spare equity, consider sliding a mortgage over to another property so that one property is then unencumbered (i.e. mortgage free); then you can take that property to another lender and borrow against it all over again. Cross collateralisation is generally to be avoided, but sometimes it can open up a bit more equity.

Cheers
Seaview

thanks again for the feedback...

I currently have an ABN, could you explain a little more in detail, if you dont mind how I could incorporate that into the picture? eg: "property investing".

Once again we greatly appreciate the feedback you have offered.

Cheers
crdm

Hey All,

My wife and I seem to have hit the serviceability wall and were wondering how to borrow more money. We have done the norm i.e. no personal debt, low CC etc, but we have done what was mentioned earlier - 100% accountability on one house when we have only 50% access to profits. It had to be done to get started, but now it is starting to hold us back. Without it we could not start.

How do people keep borrowing? We see the time coming as a great opportunity but we seem unable to borrow more.

Our mortgage broker is working on it. We have all loans with the same lender (MAV package) and not cross-collateralised. Despite getting 4 investment properties in 3 1/2 years (we have no PPR and rent currently for $9 p.w.) we want more ASAP.

How can we access more money? Does our government do what the U.S. government does with low interest rate grants and loans to investors?

Chris&K8

I think you've done well so far.
In the current climate I would take it easy for a while.
It's important not to bite more than you can chew because it's not hard to start going back-wards and to eventually lose everything.

Cheers

I'm in a similar situation in that I've apparently hit the 'serviceability wall'. I asked NAB to refinance a P&I loan that I have with ING. They are saying that it would be 'against the credit code' on serviceability grounds even though the interest rate would be 0.5% lower and my (interest only) repayments would be considerably less in any case....! Not sure what their real problem is but I've got a broker working on it for me.

Mark Leo.