How much is my new borrowing power with the new changes?

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Rahul
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Joined: Mon Jul 08, 2019 7:25 pm

How much is my new borrowing power with the new changes?

Postby Rahul » Mon Jul 08, 2019 7:27 pm

Hi, I read about the upcoming changes to borrowing power and I’m trying to work out my new borrowing power. My gross annual income is $65,000 plus super with no dependents. I have a couple of $2,000 limit credit cards with minimal balance and no dependents. If I’m not mistaken the borrowing power calculator on your site is using the old system, right?

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Otto Dargan
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Re: How much is my new borrowing power with the new changes?

Postby Otto Dargan » Mon Jul 08, 2019 9:27 pm

Hello Rahul. Welcome to the forums.

That’s correct. The borrowing power calculator will be updated soon as the changes to the assessment rate have officially come into effect following APRA’s announcement.
The good news is that a few banks have already started assessing the application on the new assessment rate. Currently, most lenders use 7.25% or 2.5% above your home loan rate whichever is higher as the serviceability/assessment rate when assessing your home loan application.

With a quick calculation, your current borrowing power is $394,326 (7.25% assessment rate). With the new assessment rate of say 6.5%, your borrowing power increases to $425,587.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Rahul
Posts: 3
Joined: Mon Jul 08, 2019 7:25 pm

Re: How much is my new borrowing power with the new changes?

Postby Rahul » Mon Jul 08, 2019 9:58 pm

That’s good. Now, I’ve checked my credit score online and as far as I can tell, my credit score is good.
Not sure which credit report lenders use when looking at my home loan application?

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Otto Dargan
Mortgage Specialist
Posts: 7528
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: How much is my new borrowing power with the new changes?

Postby Otto Dargan » Mon Jul 08, 2019 10:10 pm

Hi Rahul,

Most lenders use a credit scoring system. It is an automated computer system which analyses data from your credit file and your home loan application to calculate your credit score. Your credit file is maintained and updated by credit reporting agencies like Equifax, Experian etc.

Since the introduction of comprehensive credit reporting which came into effect in 2014, the most important change has been the reporting of your repayment history. Previous to this change, your credit report only showed negative information like defaults, judgements or bankruptcy. With positive information reporting, your repayment history also influences your credit score.

You can see your full credit report and check your Equifax score when you apply for a home loan with one of our mortgage brokers.
Alternatively, you can get your credit report free of cost once a year from the credit reporting agencies or if you’ve been declined for a loan, you can also request a free credit report.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Rahul
Posts: 3
Joined: Mon Jul 08, 2019 7:25 pm

Re: How much is my new borrowing power with the new changes?

Postby Rahul » Tue Jul 09, 2019 4:13 pm

Cool. That’s some great info. Not sure what factors are considered to determine what interest rates I can qualify for? As this is my first rodeo, how do I ensure I get the best rate on the market?

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Otto Dargan
Mortgage Specialist
Posts: 7528
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: How much is my new borrowing power with the new changes?

Postby Otto Dargan » Tue Jul 09, 2019 4:15 pm

Hi Rahul,

The home loan interest rates you get will depend on the lenders you qualify with. The three main qualifying criteria are your deposit, credit history and borrowing power. The deposit matters because it determines the loan to value ratio (LVR) of your home loan. Ideally, you want a 20% deposit to get the best rates as lenders often have the best rates for owner-occupied loans for loans up to 80% of the property. Although, you can get a mortgage with a deposit as low as 5%.

With the current record low-interest-rate environment, variable interest rates are at low mid 3 percentage with some fixed rates at low 3 per cent. Mortgage rates have not been this low since the 1960s.

Interest rates are not the only factor to consider when choosing a home loan, there are application fees, valuation fees, monthly/annual account fees, early exit fees, offset and redraw facilities fees etc.

Our specialist mortgage brokers know which lenders are offering the best deal at any given time.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan with competitive interest rates.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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