Am I calculating it correctly?

Discussion in 'Loans & Mortgage Brokers' started by darrelj, 28th Jun, 2021.

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  1. darrelj

    darrelj Well-Known Member

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    I am posting for a friend who are not members here. I told them that this forum is very useful to clarify doubts rather than asking every dick Tom and Harry.

    Background:
    This family are planning to buy a home that is $600,000. The banks (main banks) have told them that their max borrowing capacity is $550,00 and they should show 10% savings that were accumulated within 3 months or more. They do have a savings of 73k. The additional expenses worked out comes to about 23K (stamp duty, Conveyancing , etc). That means the total cost to purchase this will be $623,000.

    Question:-
    Can they buy this home ($623k with all expenses) which is over their max borrowing capacity $550k)?
     
    Last edited: 28th Jun, 2021
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Do they qualify for FHBG, SD concessions or other government schemes?
     
  3. Trainee

    Trainee Well-Known Member

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    If they borrow 550 for a 600 property, lmi is likely an additional cost they would have to pay.
     
  4. rksing

    rksing Well-Known Member

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    Based on the provided information, probably not - assuming they cannot access any governments grants and/or schemes, and the $60k savings is all they have.
     
  5. darrelj

    darrelj Well-Known Member

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    can’t we do the calculation like below.

    full cost $623,000
    Deposit $ 73,000 ( I edited my initial post)
    Therefore borrowing amount = $623k- 73k
    = $550,000
     
  6. Lindsay_W

    Lindsay_W Well-Known Member

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    If you just want a simple answer to this question it's no just based on quick math.
    $623K purchase price + State Charges
    -$550K Loan
    = $73K they need to put in to the deal, they only have $60K saved so it's a NO

    This has not even considered the LMI aspect.
    However they may have a better chance of borrowing more and at a higher Loan to Value ratio with other lenders.

    Suggest they get a good Mortgage Broker to look at their situation.
     
    Last edited: 28th Jun, 2021
  7. darrelj

    darrelj Well-Known Member

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  8. Trainee

    Trainee Well-Known Member

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    not convinced that your cost estimate is correct. Have you considered lmi?
     
  9. darrelj

    darrelj Well-Known Member

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    They are eligible for the FHBG. But the builders are not many in tasmania and wait period is 1- 2 years. So they need to be on rental property until the home is ready - that will not help them to take advantage of the 20k that they would get. The rent for 1 year will be over 20k. So no benefit unless they find a new home for sale right now.
     
  10. darrelj

    darrelj Well-Known Member

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    yes it was my mistake to type there 60K as deposit/savings. They got 73k as savings.
     
  11. rksing

    rksing Well-Known Member

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    This..
    They will be at about 92% LVR... unless their professions get them a waiver on LMI, I would assume they still need to come up with another 12-15k for LMI
     
  12. Lindsay_W

    Lindsay_W Well-Known Member

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    as per @Trainee post - what about LMI?
    Is the actual borrowing capacity limit $550K or is that the max the lender will give them due to LVR? Because if they went to a major lender the LMI is going to be somewhere between $18K and $22K therefore bringing them right up to most lender LVR maximum's of 95% (including LMI) IF the base loan was $550K. If the borrowing capacity limit is $550K including LMI then they'll need more savings.
     
    Last edited: 28th Jun, 2021