Apr 01 2025 6 mins
Dreaming of that second property purchase but unsure if your numbers add up? Our candid conversation tackles the often misunderstood relationship between property equity and income requirements that determines your true buying power.
Through a practical example based in Waikanae, we dissect the crucial difference between perceived equity and usable equity – a distinction that catches many property owners by surprise. While that $400,000 in property equity might look impressive on paper, we reveal why banks might only consider $190,000 of it usable for your next purchase, and how this dramatically affects your options.
Diving into the mathematics of mortgage servicing, we explore the five-times income rule that banks typically apply and demonstrate how rental income factors into your borrowing capacity (spoiler: it's not as straightforward as you might hope). For our example client with $80,000 income and a desire to purchase a $950,000 property while retaining their existing home as an investment, we calculate exactly what income level would be required to make this dream a reality.
Whether you're asset-rich but cash-poor, or simply trying to understand what's realistically achievable with your current financial position, this episode provides the clarity needed to set meaningful medium-term property goals. Ready to understand your true property purchasing power? Listen now and transform how you think about equity, income, and strategic property planning.