DSR question

[Ivanhoe]

Hi all!
Could anyone help me to clarify this:
Apparently banks calculate DSR in the following way:
Step 1. Combine ALL mortgages
Step 2. Calculate yearly payments on 9.55% P&I
Step 3. Substract (yearly rents less 25%)
Step 4. Divide result by annual income=DSR (debt service ratio)
Is this correct?
I have 3 questions:
1. What DSR is considered to be acceptable by 1st tier banks? (30-33% i think)
2. If you rent you are in better position, right? (there's no rent to cover it)
3. Quick calculation shows that if you want property to "stand on it's own" with 1st-tier lenders it should yield... 12%!!!!! wow.

[Monkeyboy]

Sort Of

Hi all!
Could anyone help me to clarify this:
Apparently banks calculate DSR in the following way:
Step 1. Combine ALL mortgages
Step 2. Calculate yearly payments on 9.55% P&I
Step 3. Substract (yearly rents less 25%)
Step 4. Divide result by annual income=DSR (debt service ratio)
Is this correct?
I have 3 questions:
1. What DSR is considered to be acceptable by 1st tier banks? (30-33% i think)
2. If you rent you are in better position, right? (there's no rent to cover it)
3. Quick calculation shows that if you want property to "stand on it's own" with 1st-tier lenders it should yield... 12%!!!!! wow.

Most of the above is a reasonable guide to work on. Depending on the bank some take the 3yr fixed rate and add 1%. Others use floating and add 1-1.5%

Question 1
Up to 35% for most banks. However some will go to 45% if the deal stacks up. No Dependants. Cash Savings.

Question 2
There is also the UMI (uncomitted monthly income) to be considered. Each bank allows a certain amount of expenses. When you apply, you state your expenses and then the bank checks it's expenses and whichever is the higher is the one they work with. Again each bank assesses things differently. Some only want $1 UMI others like a bit more fat.

You have to juggle both DSR and UMI to make the deal fit.

Does that help.