The Australian prudential regulation authority has changed serviceability assessments on home loan applications. The results ?
Previously when applying for a mortgage, APRA requires lenders to apply a 7% minimum assessment rate to your loan. Most lenders chose to use 7.25% which means that your application was evaluated on your ability to repay (or service) the loan as if your mortgage rate was 7%.
With many lenders now offering rates well below 4%, the gap between the assessment rate and the actual rate interest rate had become unreasonable large. Leading to many loans being rejected, or applicants having to settle for smaller loans.
The great news from now on,
Lenders are only required to add a 2.5% serviceability buffer to their own interests rates to determine whether a customer can afford mortgage repayments. This means your serviceability could be tested at a full 1% lower than before, increasing your borrowing power dramatically ! Anyone who has been rejected previously may now be eligible for finance.
Average income earners could borrow $60,000 more,
What would an additional $60,000 mean for you ? An extra bedroom? The dream house now within reach?
A family with an combined income of $110,000, assessed at a 3.75% lender rate + 2.5% buffer (6.25%) and borrow up to $60,000 more than they could against a 7% buffer. A single income earner on the same rate could now borrow $50,000 more