18 Jul How will APRA’s changes improve your home loan capacity?
Looking to buy a home? It will now be easier to take out bigger mortgages because of APRA’s decision to decrease serviceability thresholds.
Banks has reduced how much they “stress test” to see whether their customers can afford, at least, a 7% interest rate on their residential home loan repayments. This means IMPROVED BORROWING CAPACITY!
But what is Mortgage serviceability?
Serviceability is your ability to meet, or service, your home loan repayments. Banks calculate your serviceability to ensure you can afford to take on a mortgage, and to determine how big a home loan you can manage. All lenders differ in how they assess serviceability and the standards they apply in determining creditworthiness and borrowing power.
Before APRA’s changes
How were home loan applications assessed prior to the changes? If you’re applying for a home loan with an interest rate of 4.25%, the lender doesn’t calculate the repayments using this rate. They use a much higher rate to create buffer in order to ensure that you can still make repayments if interest rates rise.
Under the previous APRA guidance, lenders had to assess whether a borrower could afford repayments using a minimum interest rate of at least 7%, or 2% above the borrower’s rate, which ever was higher.
What can these changes mean for you
The changes will likely increase your borrowing potential and provide access to home loans to more people.
Industry watcher Sally Tindal said this would mean that a family of four with a household income of around $110,000 would be able to borrow up to $77,000 more. Australians with an average full-time wage of about $83,400 would witness their borrowing capacity increase by as much as $66,000.*
With the recent rate cuts plus mortgage deals with a 3 in front, now is a great time to purchase your next property. If you want to find out which lender has implement these changes or you need more details as how these changes can benefit you, book a chat with me and I am more than happy to help you.
Give me a ring on 0408 081 082.
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