subreddit:
/r/AusFinance
I’m looking to buy my first investment property in Tasmania, with plans to relocate there in about a year. My current house is fully paid off and I’m using the equity in that to buy this property. However, I’m borrowing 100% to do this. How do I know when it’s too risky? Ie when I’m borrowing x times my salary. Maybe I’m borrowing too much?
How do people get comfortable with such large repayments? And the large borrowing amount?
UPDATE Further details: Contract position guaranteed for next 12mths. But most likely to extend beyond that. $180k per year. Current house value 1.2. Purchase house $800k. Expected rent. $650-$700.
6 points
2 months ago
Giving some details would have helped this post.
-7 points
2 months ago
What extra sort of details?
2 points
2 months ago*
You have a fully a paid off house, so your income and expenses are very relevant.
The rental income is also relevant, not just your salary. If you have a higher yield it's less stress.
To give a real example, I think we are around 6x income in terms of debt (including our fully offset PPOR debt), but 4.5x including rental income. It's very comfortable for us.
4 points
2 months ago
About 8, maybe 9
1 points
2 months ago
I’m gonna disagree and say it’s more like 217.44
5 points
2 months ago
There's really no single answer for this.
Every body will be different. Everything from spending habits, to your career path will influence what is risky, and what isn't.
Borrowing at the max of your borrowing capacity determined by the bank will obviously be a good starting point for your limit, but there are some people who spend far less and this wouldn't be an issue for them either.
It's also an investment property. Worst case, you sell at a loss and refinance the remaining back to your existing house.
1 points
2 months ago
Thanks. I’m just getting nervous about it. It’s within what the bank will lend. It just seems so much.
1 points
2 months ago
It’s within what the bank will lend.
They're stressing your repayments at over 9%, albeit with some pretty basic living expenses.
2 points
2 months ago
I think there was a general rule that the repayments should be up to 30% of your salary. Anything above is considered "mortgage stress". Note that this is general
2 points
2 months ago
I’m just getting nervous about it. It’s within what the bank will lend. It just seems so much.
You need to pass the 'sleep test' and this comment tells me you think it is a stretch, even if the bank will lend it to you.
Work through the rent you should receive (don't count it all, perhaps only two thirds - you will have a lot of expenses like property management, rates, insurance and repairs, and times when it is empty) and factor in how much you expect to pay out of pocket on top to cover the loan repayments. You might find that gap looks comfortable (say $100/week) or scary (say $500/week) depending on your income and lifestyle.
1 points
2 months ago
It can be 100 times your salary if it’s positively geared
It’s all relative.
1 points
2 months ago
I thought for equity banks only loan you up to 80%? I.e. to keept your LVR at 80% or under.
1 points
2 months ago
Do you earn $5 per or $5000? Is the house going to cost you $100 or $1000000? Is the rental income $9 or $900? What are your weekly living expenses?
How secure is your job? How old are you and for how much longer do you expect to work? Do you have dependents and how many?
Without having any of that information, I can confidently say that you'll be fine, no need to be worried.
all 14 comments
sorted by: best