Lenders that are generous on serviceability

Yes please @Peter_Tersteeg

A simple fix would be to automate the calculations instead of having to do it manually. This wouldn't take a lot of time and effort and would save the failed servicing issue, or eliminate most of it. Even an explanation on the calculator itself would suffice.

 

So are the online calculators that the bank websites offer to the public useful? anywhere close to their real assessment?

They are probably too simplistic to use for a 'test run' of serviceability

 

Have not done comparisons but imagine they wouldn't be and may even be tweaked in the positive to get you to inquire.

 

That's exactly what my fix does. Took 30 seconds to implement but if the CBA put in 30 minutes of effort it could work even better.

I've sent you an email.

 

Most of them don't even follow the lenders own policies for anything but the most basic scenario. They're far too simplistic to be accurate. Even if they were accurate, most people don't have the understanding to feed it accurate figures.

Online calculators available to the public are there to get your contact details for marketing purposes. They're a sales tool only. If you want a proper analysis of borrowing capacity across multiple lenders, the only way to do it is call a broker, give them the data and paperwork they require, then give them time to actually figure it out.

 

I must email you for some direct advice

 

thanks Peter - so disappointing that banks can't even be honest with their own calculators!

 

Those calculators are a marketing tool to get you in touch with the banks, where they perform a more accurate assessment. It's more like a starting point rather than outright dishonesty.

Even if put up an accurate calculator, consumers wouldn't give the calculator honest figures, simply because consumers don't have the knowledge required to give those figures. As an example, people will tell me their income, but about 80% of the time I'll use a different figure once I've seen a payslip or tax return.

 

Are our maths skills so poor that we can't read a payslip? or do most people give you gross and you need to use net income?

I've learnt so much about my 'known unknowns' from the forum, but your comment doesn't encourage me in regards to Australia's financial literacy!

 

It's not so much about you being able to read the numbers on a payslip and more about you not knowing what the lenders policy is regarding the various numbers that appear on a payslip, then how they're applied in the lenders calculators.

Some payslips are fairly simple. They show how much you earn, how much super and tax you pay. Really easy.

Some payslips aren't. Base salary, overtime, bonus, commissions, laundry allowance, staff club payments, novated lease pre and post tax figures, salary sacrifice, charity donations, voluntary super payments, annual leave and leave loading, site allowances, tool allowances...

That's the easy stuff. What about reading tax returns when there's a couple of trusts and companies involved. Tracing the money trail through multiple entities gets tricky indeed.

Some affect the gross figures, some affect the net figures. How are these figures factored into an online calculator? Then if you know how it works for the ANZ, how does it work for CBA, Westpac, NAB, ING, BankWest...

It's not a question of simple math, it's complex policies that interact with each other. People assume that a broker fills in a few forms, sends it to the bank, asks for another piece of paper and they get a loan. It's not a simple job, it's a job where hundreds of variable and outcomes need to be considered to get the right outcome for clients.

 

Great thread..thanks everyone

 

Ohhh! thanks

close to breaking my brain with that response - I'm amazed that brokers are keen to even try and sort out financial data like that...and interpret banking policies!

"its called magic when we don't understand the science...."

 

Guys,

This is a super forum and very informative, thanks for sharing all the tips and tricks!

We are thinking about buying our second property closer to the city but not sure about our serviceability, so wondering if one of you guys can advise based on your experiences.

We have a combined base income of about $145K per year excl super and have about $40k in car loans ($28K) and credit card ($12K) combined. Have no other debt. Have one kid with second on the way.

Our current PPR is valued around $670K with a $485K balance. We have about $70K in our offset but we are adding to this aggressively every month. In terms of assets about $50k and about $100k in Super. We pay interest only on the home loan at about $1500 a month with CBA. If we buy our second property and rent out our current property, we will be looking at a minimum of $22K annual rental return. Plus depreciation and tax deductions.

Met with a mobile lender the other week who quickly said that we cannot service a loan around $900K, which is the average price of properties where we are looking to buy. I understand there will be LMI involved so we can wait and save a bit more. But our concern is, given how the price rise is not going to stop, we may take too long.

Can someone please advise where we stand serviceability wise if we are looking for a approx. $900K interest only loan? If serviceability is ok, is there a right or a wrong way to structure this?

Appreciate the help!

Cheers,
Lucki

 

Hi @Lucki you've given quite a bit of information but not quite enough to give you an accurate figure. Get in touch with myself or one of the other brokers and we can do a proper fact find and analysis for you.

I've run some quick numbers (making a few assumptions), I think borrowing $900k is going to be a stretch. Getting rid of the personal loan and reducing the credit card limit would help, but I suspect even that wouldn't be enough.

The good news is you've got a modest amount of equity and savings, I don't think the deposit and purchase costs will be a problem. Unfortunately it's probably going to take at least $20k - $30k in extra income to qualify for the amount of money you want (and I'm ignoring that one income will probably cease when the second child is born).

 

Hi Peter, thanks for your quick response. I'll send a private message.

Anyone else have any feedback on what may or may not be possible?

The way I see it, we'll be paying a $3K IO repayment monthly from about $9.2K of after tax income monthly for a borrowing of $900K. This leaves about $6K for the other expenses. This is assuming my current property is positively geared which I am certain it will be. This is in todays market rates. But I understand the lender's don't see it that way so would be happy to hear others' views.

Either way, we are saving aggressively so if we can't do it today, we'll be in a position to do it tomorrow.

 

Newbie here. When you refer to direct lender calculators, do you mean the calculators the lending specialist at bank uses if you apply for loan with them directly? Did one with CBA directly and keep getting cold feet the number they crunched out may be nowhere near real borrwing amount when it comes time for full approval

 

The online lending calculators you find on various lenders websites in no way reflect their actual policies. They're designed to get you to contact them.

I can hardly talk. The one on my website is also years out of date. I really need to review that and just take it down completely.

 

The one the bank mamanger/specialist uses will hopefully be the right one, and hopefully will have been entered correctly. It's the same ones brokers use, but is different from the ones on lender websites that are basically a marketing tool.