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Increasing your borrowing and serviceability

Posted Thursday, 12 April 2018 at 14:08 by Shape Home Loans
Tagged: Self employed Loans | tax deductible | property strategies | interest only | Loan for investment | LVR for investors | APRA lending laws | Loan for doctors | increasing your serviceability | Loan for owners occupier | Loan for investor | Investors | property investing | interest rates | Mortgage reduction | Off the plan | Low deposit | Refinance | Competition | Equity Release | Cash out | Low Doc loans | Loan declined | Wealth Creation
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Increasing your borrowing power


With the new APRA lending laws, most investors would have some sort of issues with servicing ( Ie How much you can borrow) it might be in regards to taking out more equity, buying your next property, trying to refinance your loan to a interest only loan  or simply trying to refinance for a better rate and deal.
Based on the new lending laws that has been active for the last 18 month your borrowing as of today compared to 18 month ago would be on average 45-60% less then what you could have gotten.



Borrowing is based on income VS Monthly liabilities and most importantly choosing the right lender that support your balance/file.   
So here are a few key points to consider;
1. Reducing credit card limits. Every $10,000 you reduce you increase your borrowing by average $50,000- $60,000 in home loan value.
2. Consolidating or paying off your car loan or personal loans. A simple $800 per month car loan (say a $30,000 new Mazda car with a 3 years car loan)  or personal loan would equate to  $100,000- $130,000 in home loan value.
3. Paying off your HECS in full or consolidate from a refinance- The higher your income the higher the HECS repayments has on your borrowing.
<$54,869 No hecs repayment
$54,869- $67,368 = 2% of your income
$67,369- $95,626 = 3% of your income
$95,627 and above = 4% of your income
But note some of the larger lenders will have a straight 7% of your total income as HECS liabilities once income is over $90,000 ( taxable income + Rental income) .
So in most cases paying off your HECS improves your servicing by 7%!
4. Using the correct lender that fits your income type. If you fit in any of the below income structure then choosing the right lender that would accept the highest percentage of your income ( ie 100%)  would benefit you.
For example: Ms Lee is a Nurse and gets paid $75,000 BASE PAYG and she also receives overtime due to the industry she is in, with overtime income on average of $30,000 per year and $5,000 in meal and uniform allowance.  She also as one investment property that receives rental income of $400 pw
Big 4 bank such as ANZ would take 100% of her base income and then 80% of her overtime and 80% of her allowance and finally 75% of her rental income.
However lender B ie Heritage bank takes 100% of her base income and 100% of her overtime and 100% of her allowance and 80% of her rental income. Making lender B  more favorable in term of how they view her income.
So if your income structure falls in the below, choosing the right lender will make a huge difference.
* Overtime income
* Maturity leave income
* Family tax benefits A and B
* Allowance
* Bonus income
* Self employed ( Normal full doc and low doc) - Some that takes the most recent tax returns VS the one that average the last 2 years etc..
* PAYG Contractors ( Daily rate)
* Centerlink benefits
5. Using smaller lenders ( Case by case). Some smaller lenders are more favorable towards investors and are generally more generous in their servicing. For example for a investor with 2  x investment property with total mortgage of total $1,000,000 and say both on interest only and both with rental income of 4.2% yield.  Placing the loan with a investment specialist smaller lenders would increase the borrowing by 60% more compared to a big 4 lender in most cases.
6. Rental reliant files ( Ie Over 3 rental investment property), becareful which banks you choose- If your total rental income is more than 50% of your standard taxable income OR you have more than 3 rental investment property then you will need to avoid certain banks. As a general policy medium tier lenders will cap your rental income once you have more than 3 or if it's more than 50% of your income as they view you as a professional investor ( ie self employed)
So they may take 80% of the rental income for the first 3 and then 50% for the 4th properties onwards. 
Increasing your serviceability and borrowing power

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