Borrowing Capacity.

How Much Can I Borrow?


Borrowing Capacity

How Much Can I Borrow?

Your borrowing capacity will be determined by a number of factors which include:

  • Cash deposit available
  • Equity in existing property assets
  • Experience
  • Debt Servicing Capacity
  • Quality of the asset being purchased

It is possible to borrow against existing property assets rather than sell these to free up equity. Particularly with leasehold purchases the capacity of these assets to service debt means that many purchasers choose to retain property assets and borrow against these to raise the deposit necessary to complete the purchase. The following scenarios are designed to give you a very broad idea of the way in which cash equity and geared equity transactions work.

  • Leasehold Scenario : Cash Deposit
    • Purchase Price $600,000
    • Costs Estimate $36,000
    • Total $636,000
    • Deposit $336,000
    • Loan $300,000 @ 50% gearing x 10 years
    • Repayments $43,677 per annum @ 8% P and I
    • Net Profit $168,000 @ 28% ROI
    • NP after debt servicing $124,323
  • Leasehold Scenario : Gearing on Equity in Property
    • Motel Lease Purchase Price $600,000
    • Costs Estimate $36,000
    • Total $636,000
    • House Value $580,000 / Mortgage $80,000
    • $580,000 x 80% gearing = $464,000
    • Less $80,000 mortgage = $384,000 available
    • Total Available
    • $600,000 @ 50% gearing = $300,000
    • $580,000 @ 80% gearing less existing debt = $384,000
    • Total funding available = 684,000
    • Total funding required = 636,000
    • Excess available for working &fall back capital = $48,000
  • Debt Servicing Scenario : Gearing On Equity in Property
    • Business Loan $300,000
    • Repayments $43,677 p/a @ 8% P and I
    • Housing Loan $464,000
    • Repayments $32,480 p/a @ 7% Interest Only
    • Motel Net Profit $168,000 p/a @ 28% ROI
    • House Rental Income $23,200 p/a @ 4% ROI
    • Total Income $191,200
    • Total Debt Servicing $76,157
    • Income after debt servicing $115,043

* Interest rates have been deliberately modelled above market to demonstrate capacity of the asset to carry debt at higher rates.

download-pdf

You can download the information detailed within our ‘Motel and Caravan Park Finance’ section as a printable PDF for future reference. Click here to access the PDF document.

Why Choose Us?

  • Finance for Management Rights
  • Finance for Accommodation Assets
  • Freehold and Leasehold Motel Finance
  • Initial Assessment of Funding Requirements
  • Loan Refinancing and Renegotiation
  • Assistance with Lender Annual Reviews
  • Business, Commercial and Equipment Finance
  • Housing, SMSF and Consumer Finance
  • Case by Case Consultancy

  • puzzle

    Contact Mike Phipps Finance

fresh-ideas

JOIN – IT’S SO SIMPLE…

Enter your name and email address below to receive the latest industry editorials and opinions from Mike Phipps Finance.


Mike Phipps Finance Management Rights and Accommodation Specialists Phippsfin Pty Ltd ACN 139 124 673 Australian Credit Licence 364 314

Back to Top