How will APRA’s changes improve your home loan capacity?

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.*

The takeaway

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.

*https://www.yourmortgage.com.au/mortgage-news/apras-move-to-boost-aussies-borrowing-power/264206/

Disclaimer:

Credit Representative Number 486927 is authorised under Australian Credit Licence 389328.

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.

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