How to calculate changes to your borrowing power

Discussion in 'Loans & Mortgage Brokers' started by Redom, 7th Mar, 2016.

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  1. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    A novated lease will dramatically reduce your future borrowing capacity. If you anticipate buying more property whilst the lease is in place, get a professional assessment of your 'before and after' borrowing capacity before you commit. This will require you to have an accurate quote of the deductible and non-deductible components of the lease.
     
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  2. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Yep, they sound good but can cripple your serviceability therefore borrowing capacity.

    Have consolidated more than a few of these to free up purchasing power.
     
  3. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    I'd be surprised that a second hand car with $100k on it would cost more than a brand new car.

    I am about to buy a 1 year old car for $13k when the new version sells for $22k. You could still claim it, it would still have warranty etc too
     
  4. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    If you have equity in property and if you insist on buying a car I would suggest you just borrow against the property - easier and cheaper and more tax effective.

    The only reason not to do this is if you could get a lower interest rate on finance using the car as security OR if you will not have enough deposit for the next purchase.
     
  5. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Great for cash flow as well cause you can ammortise the debt over 30 years. Not that you would want to but the option is there if required?

    Car yards and dealerships will quote really low rates but this is a carrot as when you get there (the purpose of the headline rate) you will find it is limited to a certain model and even the color. Nevermind, they have you right where they want you :)

    Ignore the interest rate and focus on the monthly payment as this is what matters in the end and what you should use when comparing quotes.
     
  6. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    With the car yard rates they often build up the price a bit more to compensate the charging of the low interest.

    Go in there and say you are paying cash, and then once you have the lowest price then ask them about finance.
     
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  7. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Also don't get the aftermarket paint & fabric protector as it is a total rip off. It can be done much much cheaper DIY or even a reputable car detailer would be much better value.

    Window tinting will be double what you can get elsewhere. Standard practice is to actually remove perfectly good tint from a second hand / trade in so they can gouge you by 100%!
     
    Last edited: 1st Aug, 2016
  8. Andrew H

    Andrew H Well-Known Member

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    Hi Redom,

    Do you have list of what general lenders discrentionary expence limits are? How does one know if they are looking good in that regard?
     
  9. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    @Andrew H - this was gleaned from a westpac calc but I believe it does vary according to postcode so just a rough guide of minimum living expenses that will be applied. The average person is usually higher and brokers need to collect info to support claims;


    HOUSEHOLD TYPE

    COST OF LIVING PER MONTH

    Single adult

    $1840 per month

    Single adult with 1 dependent

    $2074 per month

    Single adult with 2 dependents

    $2373 per month

    Single adult with 3 dependents

    $2552 per month

    Adult couple

    $2658 per month

    Adult couple with 1 dependent

    $2828 per month

    Adult couple with 2 dependents

    $3206 per month

    Adult couple with 3 dependents

    $3490 per month
     
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  10. Andrew H

    Andrew H Well-Known Member

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    thanks colin, so its not broken down by individual expence? just all discrenionary expences added together? great help either way
     
  11. Andrew H

    Andrew H Well-Known Member

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    @Colin Rice does that list include mortgage payments? it doesn't right?
     
  12. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Not in the bank calculator generally although some have a nominal breakdown.

    This is what I use to collect the stated living expenses - attached.
     

    Attached Files:

  13. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    No - see the excel spreadsheet attached for deets.

    The mortgage payments, along with any other personal debts are already entered in relative banks servicing calc so to add twice is a double up.

    The list above from Westpac calc is the absolute min figure they will use. Many people are double this!
     
    Last edited: 15th Aug, 2016
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  14. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    There is no general list, it's been a major problem for almost 12 months now...

    1. Lenders are using minimum values based on a combination of people income, family structure and where they live. It's a virtually a matrix so your minimum figure is almost certainly different from mine.

    2. Every lenders matrix is different. They're all applying figures that their own risk people determine.

    3. Most lenders are not publishing these tables. So far Westpac is the only lender I'm aware of that has actually given brokers a copy of these tables. If anyone knows differently, please let me know.

    4. How the lenders actually apply living expenses varies from one to another. For example, the NAB assumes rental income is part of your household income, but doesn't consider the accompanying debt alongside it. Some other lenders don't do this, but have their own quirks.

    5. Lenders appear to be making updates reasonable frequently, either to living expenses or other servicing related policies.

    6. This is a serious problem for mortgage broker software. I've reviewed 5 different software platforms in the past few months. None of them are reliable for determining serviceability across a broad cross section of lenders for anything but a very simple scenario. We have to assess peoples serviceability manually using each individual lenders calculator. Again if anyone knows of a reliable platform, please call me!
     
  15. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Thats how I got the data from the Westpac calc ^^^^^ and use it as a base figure.

    You are right @Peter_Tersteeg as they are tweaking it regularly which is scary for those borderline deals that involve land and construction applications :eek:
     
  16. Andrew H

    Andrew H Well-Known Member

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    Wow thanks for that @Peter_Tersteeg. That is such a pain. I'm on a borderline deal right now. With westpac!! What is minimum for 2 adults, 1 dependent? Married
     
  17. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Consider another lender as Westpac are bottom 25% (depending on specific circumstances) for borrowing capacity.
     
  18. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Not enough information. What's your household income?

    The good news is there's plenty of lenders who are significantly more generous than Westpac. @Kinnon Bell is in Cairns, have a chat with her about it.
     
  19. Andrew H

    Andrew H Well-Known Member

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    thanks @Peter_Tersteeg, @Colin Rice. My situation is a little more complicated as we have multiple properties, current loans are with NAB, ING, BW, CBA. I have an experienced broker who is advising me that he was leaving westpac and Liberty to last. Hence the westpac refinance we are going through now, trying to get a 90% LVR equity pull. We have been approved by NAB for only 77% for this equity pull, so we are trying our luck with Westpac.
     
  20. Tebelee

    Tebelee New Member

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    Thanks Redom for the informative post