The market spends hundreds of millions advertising who has cheaper interest rates.
This is no doubt an important pillar, but certainly not most. Whether you’re a first-time buyer or long-term investor, the hurdles faced are completely different no matter how many times you may have borrowed before.
We have access to each lender’s bespoke calculators and will therefore give you an accurate guide of how much you can borrow, what your repayments are going to be and ideally have a pre-approved loan application in place prior to you (re)entering the market. We find the loan that best suits your circumstances and arrange pre-approval so you can confidently go property hunting. Once you’ve found the property you want, we manage the rest.
Qualifying for a loanThe general lending criteria are:
- You should have 5% – 10% in ‘genuine’ savings (genuine savings is defined differently by lenders but typically is defined as the funds that an applicant has saved themselves gradually over time. Generally speaking, lenders require at least 5% of savings in the applicant’s account over a three-month period prior to application.
- A good credit history.
- A healthy credit score.
- Stable employment.
How to improve your borrowing capacityThe following are some tips to be maximise your borrowing capacity:
- Ensure all your existing credit are paid on time with no dishonours showing;
- Reduce your credit card limits;
- Do not apply for any other credit (be it cards, cars in the months leading up to applying for a loan);
- Apply for joint loans if need be;
- Fix your rate for three to five years (see below).
Your living expenses and existing credit make a significant difference in how much you can borrow. You may need to reduce your discretionary spending in order to maximise how much you can borrow.
Most banks use 80% of rental income while some will use 100%
Banks assess PAYG salaries in the same way but apply different percentages for other types of income, including dividends, distributions, bonuses, self-employed add backs, overtime etc
Only some lenders will take the negative gearing benefit into account which can add a significant amount of additional borrowing.
In 2019, APRA changed the way banks needed to assess a borrower’s capacity to repay a loan. Lenders use different assessment rates and therefore off the same income, will lend different amounts.
Based on the above you will have noted that there are numerous items to consider and we highly recommend calling us to discuss your particular circumstances.