By Rex Matthews
The APRA change is essentially about improving serviceability – your ability to make the repayments on a regular basis. On top of the deposit you have, a lender will look at your income, living expenses and existing debt to calculate whether you’ll have enough money left over to afford the repayments. To work this out they come up with a score called the net income surplus (NIS). Obviously, this needs to be positive, i.e. the money you have left over to pay the loan is more than the repayments.
And that’s why APRA still need lenders to include a buffer, because if rates go up, your repayments go up and you may no longer have enough money left over to service the loan. The new 2.5 per cent buffer still protects you from this. As well as serviceability, there are other factors lenders take into consideration you’ll probably hear about when applying for a loan. Things like:
LOAN TO VALUE RATIO
Loan to Value Ratio (LVR). This is basically how much deposit you have compared to what you need to buy the home. If you have a $60,000 deposit and the home is valued at $300,000, you’ll have a $240,000 mortgage and your LVR is 80 per cent. Banks generally like an LVR of 80 per cent or lower, but it can be as high as 95 per cent.
Rex Matthews has been a mortgage broker since 2009. Living and working from Fremantle through to the Stirling area, Rex is focused on saving families interest they can better use to save for a holiday. For a stress test of your home loan and to check what savings can be made call Rex on 0423 771 400. https://loanmonster.smartonline.com.au/