HOME LOANS Becoming more accessible for FIRST HOME BUYERS & Lower Income Earners.
Research indicates this change could significantly boost the borrowing power for First Home Buyers.
It is estimated a family on an average household income of $109,688 would be able to borrow up to $60,000 more if their loan was assessed at 6.25% rather than 7.25%.
Under the same scenario a single person would be able to borrow approx $50,000 more.
When you apply for a home loan, Lenders are required to complete a serviceability calculator with your application.
This servicing calculator takes into account your total household income and expenses and determines whether or not you can afford the repayments for the loan requested.
Currently, in a bid to limit excessive borrowing in an environment of low interest rates and high household debt, APRA expects Lenders to assess loan serviceability using the higher of either:
* an interest rate floor of at least 7 %
* a 2% buffer over the loan’s actual interest rate
The average interest rate floor is approximately 7.25 per cent for most banks.
The new recommendation to Lenders from APRA given that rates have been low now for some time and expected to remain low for the foreseeable future, is to allow Lenders to set their own floor rate levels. It is, however, looking to increase the rate buffer from 2% to 2.5% "to maintain prudence in overall serviceability assessments".
With all this in mind, it is vital that consumers
1. can comfortably afford their home loan repayments if rates were to rise, and
2. also understand that there are several other factors a lender considers when assessing your application.
Now is the perfect time to chat to A Mortgage Broker who can provide the necessary guidance for borrowers, especially those entering the market for the first time.
For a FREE No Obligation Chat
Ph 03 5443 9098 TODAY.