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  • Nicholas Kew

How much can I borrow for my property investment?

Updated: Apr 30, 2020


Property investment requires time to learn but is rewarding.


From my 3 years+ of helping foreigners to obtain a home loan from Australia, I can tell you that there are times when investors are rolling in out-of-this-world ROIs.


And there are times when this excitement is reduced to nothing but a glimmer, as confidence in the market plummets. As you hang on the edge of giving up.


It happens to all of us.


Even the most seasoned property investors struggle to reason with the idea of investing in the Australian property market.


And do you know what? I realised that no matter what the market condition there is always an interested buyer.


Property investment is still #1 of the best forms of investments.


In fact, most wealthy people have grown their net worth through investments in property.


As encouraging as these may be, investors are still concerned about, "how much I can borrow" to supplement their property investment in Australia.



Although there are many ways to answer "how much I can borrow for a home loan?". There's a tried and tested way which you can use to give you a working benchmark to get you started to answer your question about, how much I can borrow in a mortgage.


How much can I borrow for a home loan?


How much can I borrow for a mortgage that's the big question every foreign investor is asking. Foreign investments into Australia are still strong.


This is why I've decided to put time, money, and effort into creating valuable information here for you to help you with the big question of how much can I borrow for an investment property in Australia for foreigners.


If you follow these 3 steps below, and you really follow them, you can answer how much I can borrow on a mortgage as a foreigner.


Step #1: Organising your personal finances


If you don't know how much you earn and spend every month, you'll find it very difficult to learn about how much you can borrow as a foreigner.


Even worse, you'll find yourself to have committed to purchasing a foreign investment property and losing your deposit.


So, before you start calculating how much you can borrow as a foreigner to budget for your Australian investment property, let's find out and list down how much you earn and spend every month together.


The goal is to find out how much cash you have free every month to learn what is a comfortable commitment you can make. That way you can answer confidently how much I can borrow as a foreigner for an investment property in Australia.


I want you to open up Excel (or Google Sheets) and create a spreadsheet to serve as your master list. The headings should look something like this:



Don't overthink when you fill out your spreadsheet. But the more detailed you are the more accurate your assumptions will be.


Step one: List down everything that you earn.


Although this may be easy, consider writing down how much income you actually take home after taxes. This will reflect the amount of cash you have every month.


This way you don't overestimate the contributions you make for statutory deductions and taxes. That way you are more likely to arrive at a more accurate statement of your earnings.


Consider each income individually.


More places to find hidden income that you earn: Ask yourself what other income sources do you earn from. For example dividends, rental income, and part-time gigs.


Don't overthink this step, just jot down what you earn and move onto the next step.


Step two: Organise and list down what you spend on.


This is by far the hardest for anyone (this includes me too).


Big-ticket items are easiest to list down, but it is the smaller subscriptions such as a monthly service for Gym Membership, Netflix, and Spotify that can often be missed but add up every month.



The easiest way to learn about the small subscriptions you are subscribed for is to look through your credit card statement(s).


Step three: Find out if you have leftover cash to invest


It's easy to get yourself excited over the idea of being successful with property investment. However, I believe in starting with the basics.


There is no better way to learn about how much you can borrow as a foreigner but by learning about what you can afford. Or if there is anything you can do to achieve your goals.


The goal of this is to motivate you to find out about services or products you spend on a monthly basis which you may not need and areas of income that you earn that you may have overlooked.


Take control of your life and #livelifeyourway.


Step #2: Use The Banking Method (in Reverse)


One of my favourite ways of figuring out a difficult calculation is to try to solve it from a different direction.



What if I told you that to answer your question how much I can borrow for a home loan is to use any available amortisation calculator you can find on Google? I would recommend using this, this or this, because of how straightforward, easy and clear it is.


There's a trick and the process is quite simple:


  1. Key in $100,000 as your loan amount, set a period of 30 years and choose a market home loan interest rate for foreigners of 5.70% p.a. as an average. You should arrive at a monthly repayment of $580.40

  2. Now refer back to the balance income you calculated in Step #1. Divide your balance income from Step #1 with your monthly repayment and you will arrive at a multiple. For example $1,200 (monthly income) / $580.40 (monthly repayment) = 2.06 (multiple).

  3. With your multiple, multiply it with $100,000 to arrive at how much you can borrow for a home loan as a foreigner. For example 2.06 (multiple) x $100,000 = $206,000 (amount I can borrow as a foreigner).



Step #3: Learn if you are eligible for a loan


Learning how much you can borrow is only half the battle. Even if you know the answer to the question of how much can I borrow for your Australian investment property, you still do not know if you qualify for a loan as a foreigner.


So how do you learn if you are eligible for a home loan from Australia as a foreigner? You can either contact us to learn more or you can go at it alone with lenders.


Yes, not all lenders accept foreign borrowers (which includes expats and, income earned in a foreign currency) but you can try with different lenders to try and find one which does. Or you could make your investment journey easier with honest, transparent, and clear advice through a broker.


What you'll find is by choosing a broker you end up cutting short guessing what a lender accepts, is looking for, and needs for a successful application.


Conclusion


Yes, it takes work to answer how much I can borrow as a foreigner for my Australian investment property but once you get the hang of it you'll immediately identify how much you can borrow, if you have saved enough for a downpayment, and estimate if rental income is sufficient to subsidize or turn you a profit.


It's actually not that hard to do, because you can do it once and have a general rule of thumb when you decide which property in Australia to invest in.


Try this and if you get stuck, you can hit me up on Twitter and I'll help.

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