By Stuart Pullar, Jan 2014
Online Borrowing Calculators are designed to make life easy for the DIY home buyer.
Unfortunately, they only capture very basic information. So, unless your situation is very straightforward, there is a risk that the result will vary markedly from your actual borrowing capacity.
Further, each lender has different policies in terms of how they service loans.
Therefore, just because one lender has told you that you don’t have the borrowing capacity; it doesn’t necessarily mean that another lender won’t be happy to accommodate your needs.
As an example, here are some of the key policy differences that can have a substantial difference in the amount different lenders will lend you:
- Some lenders take 100% of rental income in some situations; most take 70% or 80%.
- Some lenders will consider actual payments for debts at other financial institutions; others will require higher figures to be used.
- Some lenders will allow family payments, maintenance, pension income etc. under some circumstances; others won’t.
Borrowing amounts will vary markedly between lenders as well. A few examples of situations that may vary the amounts include;
- board with family;
- receive income from shares or other sources other than salary;
- salary sacrifice;
- are self-employed and have complex company or trust structures;
One of the two main factors that lenders consider (the other being Loan to Value Ratio which is a measure of how much skin you have in the game) is the Debt Servicing Ratio.
This is the ratio between how much you want to borrow and how much you can demonstrate you can borrow.
Demonstrate is the key work here.
Some people will have more income than they need to meet their goals.
Other people are in the situation that they have income that does not meet lender policy – in these cases their actual borrowing capacity is higher than their Debt Servicing Ratio.
That is why Mortgage Brokers can save you a lot of time and hassle.
A good broker can quickly take you through a series of questions and help you work out which lenders will be able to meet your requirements.
Often, it is simply a case of matching you to the right lender that that will consider your specific situation.
Contact me today if you would like to check how much you can borrow, for real.
( Image courtesy of www.mortgagechoice.com.au as at 03/02/2014)