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When applying for a mortgage, a lender will consider many aspects when deciding whether to approve your loan application. One element is serviceability, which implies that you can afford the loan repayments after evaluating your expenses, income, and liabilities.
A serviceability agreement happens before credit evaluation following a loan application. However, diverse factors are involved when assessing serviceability, including the individual’s particular circumstances and the nature of the loan itself.
It is the process of analysing all the variables contributing to an individual’s comprehensive financial situation to identify serviceability and debt service ratio.
Generally, an individual’s income is set against liabilities, expenses, and other obligations. Liabilities might involve credit cards and other loans, and if dependents or children are involved, it may also impact serviceability.
Additionally, financial institutions may add a buffer to the evaluation rate to ensure the applicant can keep up with repayments if the interest rate increases.
Income can come from various sources beyond your job. Lenders will consider into account income from:
Note: Lenders will weigh whether a loan applicant can continue to live the lifestyle they do now while making loan repayments. If not, then the mortgage application may not be approved.
There are two ways to improve your borrowing capacity: reduce your expenses or increase your income.
Improving income can often be determined by factors beyond your control. You can invest in assets that will provide regular income. You can ask your employer for a pay rise or take on a second job. However, some of these options may not be practical.
Nonetheless, you have far more control over your expenses. You can reduce the liabilities you have by committing yourself to pay down your ongoing debts. Make a realistic budget to tackle your debts. You can close out loans or credit accounts you don’t use. Even if you do not owe money on them, the credit limit on unsecured products can consume your borrowing power.
It is imperative to plan your finances before applying for a mortgage or stepping onto the property ladder. You can always connect with our qualified financial planners in Adelaide over a no-obligation consultation to explore the best possible solution to manage your finances.
Jammaya purchased an investment property in Queensland. She’s taking advantage of our HiLo investor loan product which enables clients to get a 0.75% interest rate on their owner occupier home loan! Many clients are saving thousands per year with this amazing investor-only deal!
Leoni completed a purchase agreement for her first rental property. She secured a fantastic interest rate and her new property is optimised for maximum tax deductions.
“I was offered the rate, checked it with my bank, went into another branch and no one could match it!”
Jammaya purchased an investment property in Queensland. She’s taking advantage of our HiLo investor loan product which enables clients to get a 0.75% interest rate on their owner occupier home loan! Many clients are saving thousands per year with this amazing investor-only deal!
Leoni completed a purchase agreement for her first rental property. She secured a fantastic interest rate and her new property is optimised for maximum tax deductions.
“I was offered the rate, checked it with my bank, went into another branch and no one could match it!”
Jammaya purchased an investment property in Queensland. She’s taking advantage of our HiLo investor loan product which enables clients to get a 0.75% interest rate on their owner occupier home loan! Many clients are saving thousands per year with this amazing investor-only deal!
Leoni completed a purchase agreement for her first rental property. She secured a fantastic interest rate and her new property is optimised for maximum tax deductions.
“I was offered the rate, checked it with my bank, went into another branch and no one could match it!”