LMI Capping on the table again or not?

Can someone elaborate on 2-4% of credit card balance please?

 

Credit cards are generally assessed at 3.8% of the limit.

A card with $10k limit is assessed as being paid off at $380/month. $380 can service a mortgage of circa $65k at an assessment rate of 5.5% PI on a 30 year term. In reality it's not always as simple as that but it gives you an idea.

 

Lenders use 3.5% - 4.0% of the credit card limit (not balance) as the monthly cash flow drain when calculating serviceability. This gets factored in with all the other income and liability calculations to affect how much you can borrow.

A basic rule of thumb for credit cards is a 1:5 ratio. For every $1k limit on your credit card, you reduce your borrowing capacity for a home loan by about $5k.

 

Thank you, I was a little off with saying 1:4.