There are 2 factors that can limit your borrowing capacity:
1. The amount of income you have, and
2. The size of your contribution
Given the historically low interest rates, and the relatively high price of property in Sydney – it is more often the size of the contribution / deposit that sets the limit.
Most lenders cap the amount they will lend to 95% of the value of the property inclusive of Lenders Mortgage Insurance (LMI). There are a few that will allow the base debt ( before the addition of LMI ) to go as high as 95% LVR, and cap the total LVR at 97% inclusive of LMI, and fewer lenders that will allow a maximum LVR, inclusive of LMI, to exceed 97%.
And it is these thresholds that limit your borrowing capacity when you hold a relatively small contribution.
We do have one lender that provides a very creative way to assist those with a low contribution amount to enter the property market. The product offers a Secured Visa which does not form part of the LVR. This can have a limit of min $500 to $20,000 as long as this can service in liabilities at 3%.The stamp duty/costs are disbursed by this lender from the card at settlement. Any undrawn limit is available through normal visa function within 2 weeks of settlement.
The LMI can be fully capitalized to 100% LVR. Therefore the client only requires 5% genuine savings to get into a property. The 95% loan amount needs to be split;
• $20,000 being placed on a LOC which has to service over 25yrs @ P&I (This LOC secures the VISA)
• Remaining loan amount is serviced over 30yrs P&I and can be variable, fixed or both.
• A 100% offset account is available on both a fixed rate and a variable rate and you can have multiple offset accounts.
• Interest rates as at Monday 26th August – Variable 5.39%, Fixed Rates 2 yr 4.99%, 3 yr 5.29%, LOC 5.39%, Visa 5.39%
• $150 for standard settlement includes setting up the Term loan, LOC & Visa• $50 one off on settlement for each additional split .• Valuation fee (standard security in Sydney $264) ordered and payable on conditional approval or before if required.• LOC $150pa / Visa $55pa
For more information on this product please call today on 0414 259 699