Day 8

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To win, you need up to date and accurate information.

Maybe you used to know your borrowing power, but do you know your borrowing power TODAY?

The internal calculation methods used by banks and non-bank mortgage lenders are changing all the time. If you don’t know your borrowing power based on today’s calculations you are not working with up to date information.

If you are looking for a property then you are at a disadvantage if you have not recently had your borrowing options reviewed across a panel of lenders. We can provide a quick comprehensive spreadsheet when you are ready. Your bank may be offering far fewer options or borrowing power than the bank down the street simply because of their lending policies at the time.

You do not necessarily require a pre-approval, just make sure a mortgage adviser has pre-qualified you and shown you the way to increase borrowing power (if that is your goal). The key thing to remember is borrowing power varies across different lenders. Therefore the ‘right’ lender for you might change more often than you realise, the lender that was right in 2017 is unlikely to still be the right lender for you especially if your goals have changed.

There is no point looking at $1mn properties if $800k is your actual max borrowing power. Equally, if you have $1mn of accessible lending, why would you scratch around looking at $400k properties.

Different banks assess borrowing power in their own way. Some banks might approve you for further lending of $500k, and another at $1mn. There genuinely can be that level of difference. Factors like income type, age, number of dependents, yields, location, all play a part in calculating your borrowing power.

Check out Blandon’s quick explanation on how your $100,000 uncommitted income annually is often viewed as a much smaller number by the banks.

This is a video from the Property Formula Workshop. There are several unlocked for you and included in this course. To get access to all videos and spreadsheet calculators please apply for the workshop.

A mortgagehq adviser is a good place to start to help you assess your borrowing options. If a non-bank lender is required to get a peach of a deal over the line, the adviser can show you which specific specialist lender is best because the pricing and costs vary dramatically. Furthermore, they will outline a ‘path to the main bank’, ensuring you don’t get stuck with a lender that is fantastic for getting a deal across the line – but not optimal for housing your buy-and-hold.

The calculations can change weekly, you need a professional helping you because the lenders will not share all details about their private calculation methods. You simply will not know what bank is best for you without an insider’s knowledge. To request a borrowing power spreadsheet, just email me back and make sure your www.mhq.co.nz/profile is filled in (no need for docs).

Many people stop investing when their bank says they can not borrow any more, without realising that restructuring your existing portfolio may free up significantly more borrowing power. This is because longer mortgage terms can mean lower repayments which will free up some of your cash flow. The restructuring may involve changing existing mortgage terms or separating (or freeholding) certain properties in your portfolio.

Splitting banks can sometimes (but not always) help. A mortgage adviser’s job is to present your file in the best light possible and help you get what you want to be done. You will be hugely advantaged if you understand mortgage coverage explained here.

This is a video from the Property Formula Workshop. There are several unlocked for you and included in this course. To get access to all videos and spreadsheet calculators please apply for the workshop.

What investment property could you afford? Take the mortgage snapshot to find out.

Free and Fast! Taking just 90 seconds. Have your borrowing power, available mortgage top-up, UMI, and more calculated for you

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Masterclasses (Step 3 of Your Education Pathway)

Your journey to financial freedom will typically follow a path consisting of 3 Mortgage Lifecycle stages.

Stage 1: Reduction. Main goal: if investing – building $120,000+ of usable equity asap, or getting your home mortgage-free quickly, often in 10 years or less.
Stage 2: Expansion. Main goal: building your first $70,000 of annual rental income while refining your strategy for recycling equity, repeat, repeat, repeat…
Stage 3: Optimisation. Main goal: increase passive income to replace wage income, minimise time requirements, orchestrate big wins.

To take control over your portfolio purchase the relevant masterclass, or purchase all three for a special price of just $37 – this special offer appears when you check out.

Included in Mortgage Lifecycle Masterclass Series

  • Stage 1 Masterclass (60 minutes + Q&A). How to Pay Off Your Mortgage In 7 Years Without Increasing Your Repayments.
  • Stage 2 Masterclass (60 minutes + Q&A)
. Everything you need to know to: Build Your First $80,000 of Rental Income Through Properties Within 5 years.
  • Stage 3 Masterclass (60 minutes + Q&A)
. Grow your Property Portfolio Infinitely using 2020 Financing Strategies even when the Bank says No.
  • Condensed slide deck for revision from all 3 masterclasses
  • Spreadsheet 1: Mortgage Repayment Planner

  • Spreadsheet 2: 4 Yield Calculator
  • Spreadsheet 3: Mortgage Coverage Planner
Learn more

You should know that rental yields matter and a lender will be more comfortable lending when your LVR is lower and/or your net income for investment properties are higher.

Many investors build portfolios that are capital gains based, with a focus on location rather than yield. This can work – if you time the cycle well, but often you have to wait to keep investing – slowing down your portfolio building.

There are downsides of selling properties you already own, lost capital gains obviously are one of them, and these factors need to be carefully weighed against the other options of buying other properties that bring different benefits (like options for development, renovations, instant equity etc).

By selling properties that you deem have had their strong run, and replacing them with higher yield properties, you have the dual benefit of increased cash flow and borrowing power (more leverage). In addition to your current decision-making criteria remember to factor in, ‘how will this deal affect my future borrowing power’.

WARNING: do not sell without assessing the risk of cross security (we will discuss this in later emails). Preview here – how to keep your money if you sell a property.

One last note, if you are just trying to get into property investing, or if you want to sell your current family home but cannot afford to buy where you want to live, then consider ‘rentvesting’.

It is perfectly fine to own properties and rent yourself. Many people want to live in areas that do not make sense to buy in or fit their strategy of investment. If you’re purely investment-focused then try not to let emotion rule over you, which if you are buying a family home is far more likely.

Regards,

Andrew

P.S. – Tomorrow we are getting the calculator out to talk about 5 different types of yields and why they are important… don’t be scared by numbers, embrace them.

Humblebrag from me – when I was 10yr old I won a national championship maths competition (for 24Game) in year 5 and won the same contest the next year. The prize both years, wait for it… was a calculator!!! The best part was McDonald’s afterwards. Understand the numbers and you’re going to be 1 step ahead of the competition.

You could save $3,700+ per year

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