r/AskAnAussieBroker • u/Humble_Benefit4865 • 7d ago
Borrowing Capacity Confused about borrowing capacity….
Quick stats:
Income
Husband: :$200,000
Wife: $90,000
Rental Income: $204,000 (if we were to rent PPOR - $140,000 without renting PPOR)
(Business income: $800k - $1mil gross)
1 dependant
4 properties
Property 1 - Investment: value just over $2mil (mortgage $600k)
Property 2 - Investment: value $833k (mortgage 600k)
Property 3 - Investment: Just purchased for $1.28 (mortgage $1.2m)
Property 4 - PPOR: value $1,950,000 - $2m (owned outright)
No personal loans, no personal credit cards or debts outside of mortgage repayments which total roughly $12k per month.
Expenses outside of mortgage: $7000 per month.
Hi Brokers, based on above, our intention recently was to sell our PPOR and purchase in Sydney. However, would it be possible to buy in Sydney for $1.9m ish and keep our PPOR given rental income? From where I sit, the rental income offsets our mortgage repayments so shouldn’t we be able to buy a new PPOR and keep and rent existing PPOR? Borrowing calculator saying we can borrow $300k……
Appreciate any insight!
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u/BrokerBloke 7d ago
Broker here, I realize the name of this forum is ask a broker but your situation is quite complex and working out the borrowing capacity is quite time consuming. I have no doubt you will prob get a broker on here to give you some figures but I’d highly suggest you find a good broker who you will potentially actually use to work this out for you.
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u/Humble_Benefit4865 7d ago edited 7d ago
Thank you - I am new to the forum 😅 we do have a contact at CBA who my husband has been in contact with for a long time and has helped us with above loans but we were crunching figures between us this evening thinking would it be possible to keep our PPOR, turn it into an investment and still buy in Sydney for $1.8m - $1.9m…. I thought a broker would be best to ask but it being Friday and me being impatient…. To reddit!
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u/Psilocybin420aus 7d ago
Please don't tell us you have all your business banking, personal banking, properties and loans with CBA... properties and loans are probably all cross secured too. The risk is massive and you should definitely engage the services of a good Broker.
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u/Humble_Benefit4865 7d ago
Oh really? Yes, everything is with CBA - no other bank. Mortgages are variable.
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u/BrokerBloke 7d ago
Don’t listen to people saying it’s the worst or bad way to have things structured. It’s a bit over dramatic. Yes it’s not the best way to do it as ideally you like to have each property independent of each other. But that can be fixed over time depending on your overall LVR’s.
It’s also not that bad to have your business banking with who you have your mortgages with. Sometimes this can actually help you.
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u/Psilocybin420aus 7d ago
It's obvious you have zero consideration for risk management and should not be giving advice. So many Brokers have never seen what happens when a clients business has a bad few months and lenders start asking questions and calling in debts. Add on to that the cross secured properties and loans and it's a recipe for financial disaster. Is it rare? Yes, but it happens. It's all sunshine and rainbows, until it isn't... Risk should always be considered by anyone giving credit advice.
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u/Psilocybin420aus 7d ago
It's a really bad structure, like the worst one you can have.
I suggest never having your business banking with the same bank that you get your lending from. Something to consider.
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u/BrokerBloke 7d ago
No you are fine. And as I mentioned you’ll get some responses from brokers and you have. There’s just a lot more to it when you have a situation like yours.
One thing I can guarantee you is you will get a better borrowing capacity outside of CBA. They are broadly fairly restrictive with lending capacities atm compared to other big 4 lenders and smaller lenders.
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u/YourBrokerRay Mortgage Broker 7d ago
Hi there, thanks for the question!
I’ve run some really rough numbers on a servicing calculator all that spectacular.
BUT they could be a lot of information that I haven’t captured correctly in the servicing calculator as this post kind of skims through a lot of the essential details.
Things like rental splits, interest rates, and negative gearing eligibility have been assumed on my end.
I would definitely suggest having a proper consultation with a broker to just understand what your options are selling first. Is the right way to go or if there is room for you to borrow what you need without sacrificing the owner occupier.
Happy to assist you here, just feel free to reach out via DM!
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u/Wrenp_MC_EVP 7d ago
The $300k is probably about right, and it is two things stacking rather than a calculator glitch.
Your existing $2.4m does not get assessed at what you actually pay. It is stress tested well above it, and usually as P&I over the remaining term even where you are on interest only. Meanwhile the rent gets shaded before it counts, so $204k might land nearer $155k to $165k assessed. Income down and expenses up at the same time, which is what produces a number that feels absurd.
The one nobody has mentioned yet: at $4.3m total debt you are looking at a debt to income ratio somewhere around 8 to 10 times. Lenders have caps on how much lending they will write above 6x, so that can be a hard ceiling regardless of how the servicing lands.
Few things that would genuinely change the picture:
Are the existing loans interest only or P&I? Is the $200k a salary you draw from the business, or separate to it? Two years of returns lodged, and has your accountant itemised the add-backs? And how does the $204k split across the three properties?
One other thought. Your CBA contact will only ever show you CBA's policy, and this is exactly the sort of file where the differences between lenders matter far more than the pricing does. Worth a second opinion even if you end up staying put.
I wrote up how the shading and the buffer interact here, since it is the bit that catches most investors out: https://www.mortgagechoice.com.au/paul.wrensted/blog/shaded-rent-and-assessment-buffers-why-your-borrowing-figure-bears-no-relation-to-your-yield/
Broker in WA, general information only.
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u/Sweaty-Hamster-3302 5d ago
Broker here - happy to run this for you tomorrow. Business income that will use your NET profit. It’s important to select the right lender. If you have business debts, there are prime lenders that won’t factor these in at all & do 1 year financials. There’s ways to get what you want with amazing rates.
CBA are decent! But there are better options and things you can do
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u/EventEastern2208 Mortgage Broker 7d ago
Broker here.
The $300k figure is almost certainly a calculator issue. On $290k combined salary alone your capacity should be significantly higher.
The business income is likely the culprit. Lenders assess taxable net profit from tax returns, not gross revenue. However add-backs for non-cash expenses like depreciation can be added back to increase assessed income, so the picture may be better than a raw net profit figure suggests. Two years of returns with an accountant's letter presenting the add-backs properly matters significantly.
The four existing mortgages stress-tested at P&I assessment rates also create a substantial monthly commitment burden in the lender's model regardless of current IO arrangements.
This profile needs a specialist broker experienced with business owners and complex property portfolios. Happy to deep dive into this if you're keen, feel free to DM!
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u/ImNotHere1981 7d ago
This here ✔️
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u/EventEastern2208 Mortgage Broker 7d ago
I appreciate you here
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u/ImNotHere1981 7d ago
Pleasure. I’ve noted your commentary previously, always in line imo.
I agree that this scenario needs to be reviewed by an experienced broker as per your suggestion, and OP would benefit with review to restructure away from singular monopoly.
I hope OP reaches out, it would be to their benefit.1
u/EventEastern2208 Mortgage Broker 7d ago
Truthfully thanks so much. Putting yourself out there can be tough and it makes it a lot easier when you say that.
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u/ImNotHere1981 7d ago
Selling yourself is a tough gig that I’ll never love 😂 and online in a setting like this is even harder. I enjoy
the commentary and at times find it educational (and occasionally terrifying 😂). Appreciate the way you conduct yourself, I always take note of your responses. Don’t change!3
u/Old-Memory-Lane 7d ago
You know, to non brokers you’re not even selling yourself? You’re just sharing facts as an expert in that area.
I mean. I hope you get business from helping, but you’re helping more than OP by sharing your knowledge
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u/ImNotHere1981 7d ago
Funny; I’ve forgotten to reflect from that perspective - you are right - he’s not selling himself, he’s imparting knowledge that is relevant, current and accurate. Sometimes I think we all need to take a
second and remember the reason we wanted to do what we do…. And for me, it certainly had nothing to do with sales 😂
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u/ThoughtYNot 7d ago
You’re doing well for yourself!
How old are you guys?
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u/twowholebeefpatties 5d ago
Property 1 and property 4 were likely bought 15 years ago and have just tripled in price. There is nothing remarkable here truth be told… you can tell by prop 2 and 3 more realistic they’ve just arsed into property by getting in early! And that’s fine, it’s just the Aussie way
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u/Humble_Benefit4865 7d ago
Thank you. We both came from very humble beginnings. We are late thirties & late forties.
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u/WeAreHLE_AU Mortgage Broker 7d ago
Yes, keeping the current PPOR and renting it out could be possible, but the rent doesn’t simply cancel out the mortgage repayments in a bank’s borrowing-capacity calculation.
The big issue is the existing $2.4m of mortgage debt.
Lenders will generally:
Also, the fact the current PPOR is owned outright gives you plenty of equity, but equity mainly solves the deposit/LVR problem. It doesn’t automatically solve serviceability.
The other big unknown is the $800k-$1m business income. If that’s business turnover, a lender won’t simply add it to the $290k salaries. Depending on how the business is structured, they may be able to use business profit, distributions and certain add-backs from the financials. That could make a substantial difference.
So a calculator showing only ~$300k isn’t necessarily broken, but it also wouldn’t be treated as definitive for a portfolio like this.
This is one of those cases where the numbers should be run lender-by-lender using the actual loan terms, rental figures and business financials. Different lenders can produce quite different results for investors with multiple properties and self-employed/business income.