My fiance and I are looking to purchase our second home, one as an investment and the other as our residence.
I am getting some pretty varied estimates from the banks about how much we can borrow.
Does anyone have know how they calculate your borrowing power?? or more to the point your risk rating?
Any help would be appreciated.
Hi Anthony
This question gets asked fairly regularly so do a search on the topic and you will see what has been writeen previously.
In a nutshell a lender takes your net taxable income and adds to this an percentage of your assumed rents (both current and future).
From this Gross figure they deduct an amount equating to a living allowance (varies depending on the size of your family) as well as your existing mortgage repayments, personal loan commitments and a percentage of your credit card balance (Loan repayments are usually worked on a P & I figure 1 – 1.5% higher than the current variable rate to allow for interest rate fluctuations).
This gives a net monthly figure (hopefully a positive one) and the lender divides this figure by the monthly P & I factor for $1000 worked again on the affordability rate.
This gives the amount you are able to borrow.
Richard Taylor | Australia's leading private lender
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