Borrowing Power Calculator and other questions

Discussion in 'Loans & Mortgage Brokers' started by smallbuyer, 3rd Feb, 2021.

Join Australia's most dynamic and respected property investment community
  1. smallbuyer

    smallbuyer Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    404
    Location:
    WA
    Hello, Does anyone have a decent borrowing power calculator which in particular works well with giving an idea how existing borrowings will effect lending. So many of the online ones just say put in existing repayments but we all know the actual assessment will bump up the interest rate and make all IO's into P&I.

    Also had a few specific questions for the brokers.

    How are lenders treating NRAS properties these days? Are they counting the $10k tax free from from NRAS or at least allowing an agents rental assessment instead of the actual 20%+ reduced rent?

    What assessment rate are most banks using these days?

    After they put their huge assessment rate do they then count the loan repayment as the remaining term ie 23 years or whatever or do they use assessment rate @ 25/30 years?

    How does it work if you are borrowing as a single when in a relationship? If the partner isnt on the property title or loan i assume they dont count their income. Surely they dont count them as a dependent if they earn income?

    How do they treat cash in an offset account?

    Thanks a lot
     
  2. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    4,982
    Location:
    QLD/Australia Wide
    No publicly available borrowing calc is going to be accurate
    Why don't you just engage a good broker?? You're bound to get it wrong trying to do it all yourself.
    Most operate at no cost to you, the borrower, and they can actually save you thousands of $$$
     
  3. smallbuyer

    smallbuyer Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    404
    Location:
    WA
    Definitely using a broker when its time to do something. I like playing with figures though and online ones are a joke. I had broker excel ones before but my understanding is pretty much all broker ones these days are through an app not something stand alone.
     
  4. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    4,982
    Location:
    QLD/Australia Wide
    If you already have or intend to use a broker for the transaction I would suggest getting them to run the scenarios for you.

    Not all lender servicing calcs are online, many are still excel type formats but they are regularly updated so if you had one from >6months ago it'll be out of date
     
  5. smallbuyer

    smallbuyer Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    404
    Location:
    WA
    Broker will be onboard when its close to time to do something. Certainly would appreciate any of these recent excel ones if brokers are willing to share :)
     
  6. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    Lenders consider their calculators to be 'commercially confidential' and have been known to cancel accreditiations with broker who share them. Loosing accreditation with even a single lender can mean loosing our business.

    Even if we did share them with you, there's a high probability you wouldn't enter the figures correctly. People have a funny habit of working the figures to get the outcome they want.
     
    Lindsay_W likes this.
  7. smallbuyer

    smallbuyer Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    404
    Location:
    WA
    Definitely wouldn't want anyone to lose their accreditation.

    Working the figures to get the outcome required is the idea. Do i need to sell a house so i can refinance others. What happens if i chop up credit cards. Can i cut work down to 4 days a week etc

    Must be some sort of decent calculator out their, one that lets you adjust all the settings so you put in roughly what a lenders requirements are.
     
  8. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    4,982
    Location:
    QLD/Australia Wide
    That's your brokers job, not sure why you're trying to do it yourself when a broker can run those scenarios accurately for you...
    Future planning is a big part of what I do for my clients, if you think you should only engage a broker when you're about to buy or refi etc then that's the wrong mindset IMO
     
  9. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    That calculator is called a Mortage Broker.
     
    SuperOlaf likes this.
  10. inertia

    inertia Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,617
    Location:
    Newcastle, NSW
    I can understand what @smallbuyer is trying to do. I am frequently playing with figures and spreadsheets - usually when there has been something going on in the back of my head and I just want to punch in some info. Not the sort of stuff that needs to take up the time of a broker to play with.
     
    Shazz@ likes this.
  11. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,260
    Location:
    Australia
    But if the calculator isnt accurate whats the point?
     
  12. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    I wish I had a useful tool to help clients with this. Brokers spend a significant amount of time playing around with 'what if' scenarios for clients. A simple tool that starts with the clients basic financials and lets them play would be incredible.

    The problem is that an accurate and simple solution simply doesn't exist. The software that is at the core of my business generates borrowing power estimates. It's not simple to use or to create multiple scenarios. It's not even remotely accurate on borrowing power and now I don't even bother using it for this purpose. Instead I use lenders individual calculators, relying on my expeirence and a process of elimination to come to the best outcome.

    Good software for this purpose has a been a serious problem for about 5 years. I've made several very serious (and expensive) business decisions around this topic over the years. I have a degree in Software Engineering and a very good understanding of the problem itself. I'm not sure the problem can be solved adiquately in the current lending environment. I'd be more than happy to sit down and work with anyone who thinks they do have a solution.
     
    inertia likes this.
  13. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    4,982
    Location:
    QLD/Australia Wide
    Having one simple calculator that combines all lenders servcing calcs would be incredible.
     
  14. smallbuyer

    smallbuyer Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    404
    Location:
    WA
    Sounds like its a tricky one to get something very accurate as each bank seems to be different and they keep changing. I certainly dont have a solution :( I did manage to fine one only that seems to have a lot of options in it NAB. Lets you put in each existing loan with loan and IO term remaining for each. Is it accurate though, who knows.

    Regarding banks most online calculators (for customers) i think they are like bait advertising. Has one field for existing loan payments, fill that in accurately and it says can borrow heaps but its a lie. I know this is untrue as i know they will load up existing loans but many wont know this. How is the different from Kogan advertising a product for $199 which suddenly becomes $299 when you try to buy it?
     
  15. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    The NAB calcualtor is accurate for NAB only, if you enter the right numbers into it. Other lenders use different metrics (that you don't see but are built into their calcualators).

    You're correct, the banks online calcualtors are bait advertising. They don't even ask the right questions to conform to the lenders policies. They usually grossly overestimate peoples borrowing power.

    Until 2015 the lenders policies were fairly clear. In some cases I was able to reverse engineer lenders policies into my own Excel spreadsheet. Then APRA happened and wanted more detail on living expenses. Every lender has their own HEM table, they're all a little different and not disclosed. It's now almost impossible for a third party to reverse engineer any one lenders calculator, let alone multiple lenders. Building the ability to test different scenarios on top of that only makes the problem singificantly harder.
     
  16. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    4,982
    Location:
    QLD/Australia Wide
    Yep spot on, gets people exited, that leads to them calling the bank
     
  17. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

    Joined:
    23rd Aug, 2015
    Posts:
    1,546
    Location:
    Bella Vista
    All your questions can easily be resolved by using a broker.

    Different banks, different policy and different assessment rates.
     
  18. Shazz@

    Shazz@ Well-Known Member

    Joined:
    24th Jun, 2018
    Posts:
    1,310
    Location:
    NSW
    Right or wrong, my mortgage broker has taught me how to use the servicing calculator for one of the big 4 banks a non-bank. Sure it may not be accurate, but I’m looking for ball park ranges.
    I don’t want to bother my mortgage broker every 2 secs for something I may not go through with.
     
    craigc, smallbuyer and Terry_w like this.