Borderline Serviceability Assessment

A potential situation is a borrower looking to take a home loan top up and they pass on a lender's serviceability calculator, but with only ~$40 left per month after all monthly commitments.

How does the assessment teams look at this situation among the majors vs the smaller lenders? If likely to be knocked back, what is the bare minimum left over that the assessors would consider?

Or does it not matter as long as it is a PASS?

Thanks,
Lucki

 

Depends on the lender. Some have a $1 pass requirement

 

Most lenders are okay as long as it passes by $1. Others want a $200 or more surplus.

What can also be very frustrating is that sometimes it's not an exact science. It's not unusual for a credit assessor to interpret some aspect of a persons income or debts slightly differently. A variation of $40 or more can easily slip in (for better or worse).

Hence a borderline servicing scenario tends to make me quite nervous if there isn't an alternate strategy available.

 

Thanks guys. I take it the smaller lenders are the ones that need passing by $200 or so while the majors like CBA are ok with even a pass by $1?

That is provided everything else is in shape, as in no other debt and LVR at/under 80%.

 

Don't make any assumptions. The metrics also vary within lenders. For example Macquarie require a $200 surplus for LMI deals, but $1 for lower LVR deals.

For some lenders, I've literally had an assessor say, it meets the metrics, but it seems too tight. Nice to know that all that number crunching can still come down to an individual's 'gut feel'.

 

CBA generally is pass/fail - but banks are a little more risk conscious these days and will depend on the overall strength of the application too. Overall based on what you've said, that should be OK.

If you're passing CBA by $40, you'll likely have other lending solutions available to you too.

Recent assessment rate changes help significantly here - they increase the spread in borrowing capacities from lender to lender that helps provide more solutions to 'borderline' deals.