When it comes to home loans, not all Banks are created equal.
They all view and assess your application in different ways. Self-employed income, bonuses, or rental income may be treated differently, which can affect the amount you can borrow.
Banks have policies and tools to gauge the suitability of an applicant such as ‘stress test rates’ and ‘UMI’ (uncommitted monthly income) calculations. These tools and calculations all differ across the lenders.
For example, when looking at a ‘stress test’, a Bank assesses whether you can afford to continue to make mortgage payments at a higher interest rate than the one you’re expecting. Currently the ‘stress test’ rates can vary across the lenders, anywhere from mid 8% to over 9%.
So, if one Bank has a ‘stress test’ rate of 8.5% and another has a ‘stress test’ rate of 8.95% then you may have a better chance of getting your lending requirements satisfied from the Bank with the lower ‘stress test’ rate. Unfortunately, they don’t publish their ‘stress test’ rates, so this is a good reason to talk to your Mortgage Adviser who can offer you guidance!
Some Banks also use a ‘UMI’ calculation, which looks at how much uncommitted income you will have left over at the end of the month. This is another way to see if you can afford the new home loan you are seeking. Some Banks have a very strict ‘UMI’ number that they adhere to, while others may be more forgiving.
To assess your borrowing power, the Banks all have different criteria and guidelines they must follow as well as their calculators, are set up based on these criteria.
So how one Bank views your application can substantially differ from another.
As an example, one Bank may not accept boarder income whereas another might.
One Bank may use your overtime or bonuses when assessing your income and another may not.
These things may seem minor but can considerably add up when you are trying to get the most out of your borrowing power.
Below is an easy comparison between the Lenders and the maximum borrowing available to the same couple.
If dealing with Lender G, as opposed to Lender A, there is a differential of nearly $145,000!
This could be the difference between securing the property you want or not.
So how do you know if you are getting the most out of your borrowing power?
Our job as Mortgage Advisers is to make sure that we find the maximum amount possible to borrow in this ever-changing market.
On your behalf, we can consider what all Banks have to offer, helping you make an informed decision, by running calculations for you, so you can see how you can maximise your borrowing power to obtain the best deal available for you.
By being well-prepared, doing your homework and getting advice from a trusted Mortgage Adviser, you’ll be able to manage your home loan application with confidence.
So, feel free to reach out if you need a hand, or just to have a chat about this, pick up the phone and call 0800 LENDER (536337) or email to [email protected]
