Posts Tagged ‘maximize your borrowings’

Should I borrow 100% of the investment property price?

Many borrowers on high incomes do arrange a 100% investment loan and they may even borrow the costs as well. An additional security property will be required if you borrow 100% of the purchase price. There are usually greater negative gearing taxation deductions available if you maximise your borrowings.

You should remember, however, that maximising your borrowings will also maximise the rental shortfall each month which must be funded from your own pocket.

For example, if your loan repayments are $2,000pm and your rental income is $1,200pm, there is a shortfall of $800pm to be funded by you plus normal outgoings for insurance, repairs, agent fees, council rates etc. Your total monthly shortfall could be $1,000pm or more. It is important that you are capable of covering this monthly shortfall in addition to your normal living expenses.

You can also discuss with your Accountant the possibility of claiming your negative gearing taxation benefits progressively during the year instead of making a large single claim at tax time. This will have the effect of reducing the monthly shortfall which you need to fund.

If your income is lower and you may have difficulty funding a monthly shortfall, a 100% investment loan may not be sustainable or suitable for you.

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LENDING UPDATE 14.06.19

  • LIVING EXPENSES ARE NOW A KEY ISSUE
  • COMPREHENSIVE CREDIT REPORTING NOW IN EFFECT
  • INVESTMENT LOANS AT OWNER-OCCUPIER INTEREST RATES
  • REVERSE MORTGAGE LOANS FOR SENIORS OVER 60
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