Same client, 25 different options.

A recent snapshot of our servicing/borrowing capacity tool for one of my clients.

Same client, same scenario, and a whopping $106,000+ variance in borrowing capacity.

These are only a percentage of the lenders that I liaise with. Max capacity is a guide and may not be reliable if investment and owner occupied loans are involved. No loan approval can be assumed based on these results. All data is correct as at 03/02/2024 and is subject to change.

How lenders treat different income, liabilities, living expenses, loan value ratios and built in buffers - all lead to significant deviations in borrowing capacity.

HEM is Household Expenditure Measurement. That is monthly living expenses. And is based on household income and the number of people that depend on that income. Here there is a $212- variance per month.

Non Bank lenders use an assessment rate buffer of 2% over the actual rate compared to banks 3% buffer. Although for a refinance, some lenders will use only a 1% or 2% buffer.

When calculating repayments of existing loans that are not being touched, there are different methods used. The actual repayment of the existing loan. The actual repayment plus a buffer. Or they use the same rate as the loan you are applying for plus that particular buffer. All lenders are different.

With credit cards, Lenders under legislation, must use 3.8% of the credit card limit to determine serviceability.

Loan Value Ratio is now playing a part in what rate a lender will offer. The lower the percentage the lower the rate. Here we can see 80% LVR ranges from 6.09% to 7.44%. Whilst 70% LVR ranges from 5.99% to 7.29%.

A recent poll on the barriers to securing a mortgage had high interest rates/repayments at 28.20% and Servicing Buffers at 32.50%. Using the above table proves how imperative it is to compare all lender options.

When looking for a loan there are multiple different factors to be considered. Whilst using a lenders website can in insightful another lender might have better options. However as over 70% of all residential mortgages are written via a broker, using one of us will save you time and money.

I have already reviewed a number of client’s facilities over the past few months and will continue as the market changes. If you would like to know how your current loan compares, please email at phil+refinance@phaservices.com.au

This information has been prepared by PHA Financial Services and does not take into account your objectives, financial situation or needs. Before acting on this information you should consider whether it is appropriate to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. The information provided was accurate at the time of publication and changes in circumstances after a document is published may impact on the accuracy of information. Some information may have been collated from various third parties and we make no assertion that the information was originally ours.