How big a mortgage can you afford?
Suncorp Mobile Lender, Dane Gaspar, talks about affordability and accurately calculating their expenses.
What you can afford isn't just about what a bank says you can afford, it's also about your lifestyle.
I encourage customers to be as accurate as they can be when they're calculating their expenses, so that when they have the loan they won't be eating two minute noodles every night.
When calculating affordability, one of the methods Suncorp Bank uses is what we call a sensitised interest rate, which is an average interest rate over 30 years. This aims to help later down the track if the interest rate changes, so you still have a financial buffer.
You should think about future income, what happens if you decide to have kids and if you are relying on two incomes, what happens if you need to drop from two incomes to one.
Also, the things that make your life meaningful – Christmas time, birthdays, holidays. Customers need to think about what they might be giving up to have a home loan.
It's tempting to ignore unexpected expenses. But having money saved up as a buffer for things that may need fixing when you do have a new home – like air conditioning, heating, and plumbing is a good idea.
Ultimately it's up to you to work out what you can afford, but we can help guide your thinking.
Book an appointment with a Suncorp Bank mobile banker online.
Calculating your borrowing capacity
Suncorp Mobile Lender, Dane Gaspar, explains how Suncorp Bank calculates how much you can borrow to buy a home.
When it comes to how much you can borrow, we want to help make sure that your income is greater than your expenses and that you have a good buffer.
We check that you can afford repayments on your loan over 30 years, with potential interest rate fluctuations.
And we want to make sure you have a little bit left over every month to allow for expenses that come up.
The cushion amount varies between different applicants because it's based on your own lifestyle and everyone is different.
First home buyers should be able to service a loan and have enough money left over every month to live comfortably, because it's important to not live above your means.
So we look at personal expenses – bills, childcare, school fees, car loans and credit cards and the available limit on those cards, as well as interest free facilities like store cards (people often forget about them). And we consider your deposit amount.
Book an appointment with a Suncorp Bank mobile lender online.
Whether you are buying a home, or refinancing your existing home loan, you will need to know what your LVR is. But what is it and how do you find out?
Essentially, LVR is a simple way of explaining the difference between the amount you are borrowing from your bank to buy a property, compared to the value of the property, minus your deposit that you have saved. That number is then given as a percentage. Get it? No?
The best way to explain it is having an example:
Say you want to buy a house for $500,000 and you have saved up $50,000 as a deposit. Your LVR would be 90% - as you have 10% of the value of the property.
You should know your LVR as there may be a certain amount for you to successfully receive a loan.
In the event you are borrowing more than 80% of the value of a property from a bank, you will more than likely have to pay what’s called Lenders Mortgage Insurance (LMI). This LMI is a cost that protects the bank in the event you are unable to pay your mortgage.
Alternatively, if you are borrowing less than 80% of the value of the property, you are considered a less ‘risky’ customer and will not be charged LMI.
LMI is not a premium you have to pay upfront nor pay every year or monthly. The LMI is added on to your mortgage and you will pay it off with the rest of your mortgage over time.
If you don’t have much available for a deposit on a home, paying this LMI may make it possible for you to be considered for a larger loan.
Government fees & other costs
Buying a property costs more than just the purchase price. When it comes to getting a home loan, government fees can be a factor in knowing how much to budget. It’s important to be aware of all the additional costs you’ll incur when buying a property – and budget for them accordingly before you sign a contract.
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The information is intended to be of a general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.
Any advice contained in this document has been prepared without taking into account your particular objectives, financial situation or needs. For that reason, before acting on the advice, you should consider the appropriateness of the advice having regard to your own objectives, financial situation and needs. Where the advice relates to the acquisition, or possible acquisition, of a particular financial product, you should consider the Product Disclosure Statement before making any decision regarding the product. Contact us for a copy.