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Living cost calculations

Discussion in 'Property Finance' started by Tim & Chrissy, 5th Dec, 2015.

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  1. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    My main hurdle to obtaining finance seems to be the new minimum living cost calculations some of the banks have been using since July 2015.

    CBA told me they automatically calculate our living expenses at $1,050 per week. I am employed full-time, my wife is self-employed and we have 4 dependent children. We have equity to purchase another property but keep failing on serviceability.

    Are there any lenders that use a lower calculation for living expenses and include additional income such as overtime etc.?

    (For the record: We currently pay $1,350 per week into the mortgage [not inc. my wife's business income], with the minimum payment being $730 per week so I know we can afford the repayments on an IP)
     
  2. tobe

    tobe Well-Known Member

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    No. But there may be another way around it. Give a broker or two some of your details and see if they have any ideas on which lenders niches may suit your needs.
     
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  3. bob shovel

    bob shovel Well-Known Member

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    Have you gone through your bank statements and check what your actual numbers are? Couldn't hurt having a detailed breakdown with you
     
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  4. Tony Fleming

    Tony Fleming Well-Known Member Business Member

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    APRA jerks strike again
     
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  5. Redom

    Redom Mortgage Broker Business Member

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    The minimum living cost changes have definitely impacted serviceability - quite substantially in some cases (depending on income, etc) and lender.

    In terms of ways around it, there are lenders that have smaller minimums than others (they use different metrics, or haven't adjusted to a new higher minimum yet). It may be a case of seeking an alternative lender, CBA are reasonably conservative with some of their recent changes.

    This is definitely an area of focus for ASIC who have been trumpeting quite loudly over the past few weeks about further verification of living expenses.

    This is starting to be reflecting in lender behaviour. I note that on CBA deals they are asking for a bit more verification of expenses than usual (1 month transaction history, rental expense confirmation).

    Cheers,
    Redom
     
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  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    A lender and broker must take steps to ascertain what the client's minimum living expenses are. Where these are higher than the lender's minimum assessable living expense figure the client's figures must be used.
     
  7. HomePage

    HomePage Well-Known Member

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    I track my personal finances in detail and don't spend as much as $1050 a week for living expenses. Just wondering if the banks will accept an actuals report for living expenses from a personal finance program, like Quicken, in lieu of their inflated (for me) estimation?
     
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  8. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    When I refinanced our current IP with Qantas CU they actually went through the statements and added additional expenses to the minimum they use. They then ignored additional income that was evidenced on the statements over the 6 month period.

    I was able to refinance but at $70k less than I applied for, they also came in with a lower valuation than Aussie and CBA.

    It was the most intrusive experience I have had when applying for finance. After they approved me on serviceavilty etc. I was asked what I needed the additional funds for, I said to invest in another property - knocked back. I went back and said I will use the money on non-stuctural improvements to the IP to improve the rental yield and they ok'd it on that.
     
  9. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    In fairness to them they are only trying to save me from myself and it really is a miracle I got through life this far without this level of government intervention
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No they wont.
     
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  11. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    In general no................

    if you live below the lenders mins, they will apply the mins.

    depending on your personal circumstances there may be a way to get around it, IF its an issue to your lending growth.

    if its not getting in your way, I would not be concerned about it

    ta
    rolf
     
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  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Why the choice of QF CU ?

    ta
    rolf
     
    Last edited by a moderator: 4th Nov, 2016
  13. charpj

    charpj Well-Known Member

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    Rolf,

    The are still operating at 95% LVR for investment (I think it was 90% for refi) and their pricing for investment is very sharp
     
  14. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    CBA were willing to go to $30k more and the val was checked on the spot, over the phone (my income was also around 5k lower at that time).

    The mortgage was originally with CBA but the rate kept going up for various reasons to the point it reached 4.82% and Qantas was still at 4.14% with all the loan features I needed (100% offset, IO period).

    I believe CBA will take into account around $14k tax free income and $10k PAYG income. My wife also has part time business income ($15k, no tax returns yet) so I know that's out unless I go for a low doc.
     
  15. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Based on their calculations our expediture was greater than our income which is obviously inaccurate.
     
  16. HomePage

    HomePage Well-Known Member

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    Just had a go at NAB's home loan estimator, which told me the most they would lend to me is $328K, despite having a deposit available of much more than that (ie. < 50% LVR) and a very conservative net household income of $95K pa. Things have tightened up indeed!

    Edit: maybe I was supposed to put something in the rental income box to provide estimated rental return, but I can't really do that until I know how much I can borrow, hence buy price, yield and estimated rental income ie. a bit of a chicken and the egg scenario.
     
    Last edited: 6th Dec, 2015
  17. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    It just came down to the interest rate + having all the loan features I needed. In the interest only peroid the repayments are $90 less per week and around $50 less per week in the P and I period.

    Serviceability is my biggest problem at the moment so I need to get the principle down so I can redraw in lieu of borrowing more.
     
  18. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    We are only at around 75% LVR on their val. They were the cheapest investment loan with the option for IO period and 100% offset account.
     
  19. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    I feel your pain.

    The rent on the property is $955 per week (evidenced in 6 months of bank statements). On a $750k loan at 4.14% our P and I repayments were $840 per week but because we have 4 dependent children + my wife was counted as a dependent due to her business income not being counted (as well as other tax free income not counted) they would only go to $680k max.
     
  20. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Sure I can see those being a benefit

    but if one cant get the level of $ money due to whatever ( such as posted here), a great rate or apparent high LVR isnt useful.

    At these High lvrs,the LMI premium is stratospheric for loans at 95 % and most lenders wont cap the LMI over that anyway - meaning you have a 95 minus lmi premium, which is about the same as a 92 + but often twice as exxy.

    No DUA, and only one LMI provider that will do tha deal in any case, the LVR looks good, but getting it approved for an average borrower wouldnt be simple

    ta
    rolf