Is it true that banks can loan you more on investment properties as
compared to diversified funds even when the returns are not bad?
Q.
Our property is worth $510K and we have $70K more to pay off. We
invested $200k in a diversified fund which pays us $4k per quarter.
How much can we potentially borrow from the bank to invest in
property? Can our fund and our property total up as the amount in
equity that we can borrow? Is it true that banks can loan you more
on investment properties as compared to diversified funds even when
the returns are not bad?
A.
You have equity of $440,000 in the property, so I would imagine
your bank would lend you approximately 80% of that. However, be
aware that all the equity in the world is no good unless you have
the income to back up any borrowings against it. Your first step
should be a discussion with your bank. Yes, banks do lend more
against property than against shares.
Each week financial advisor Noel Whittaker answers your
questions.
