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.
The deposit you need will depend on the type of transaction and loan facility you choose. If you are looking to purchase or refinance your own owner-occupied property, you can generally borrow up to 95% of the purchase price or valuation (whichever is the lesser) i.e. up to a 95% loan to valuation ratio (LVR) inclusive of any lenders mortgage insurance that may apply. Higher deposits may be required for investment lending and/or borrowing to finance the purchase of vacant land for construction loan purposes i.e. 10% minimum deposit or maximum 90% LVR.
Lenders Mortgage Insurance (LMI) is required on all borrowings in excess of 80% of the property value.
NOTE: The borrowing limit for refinancing your mortgage is 90% of the purchase price or valuation (whichever is the lesser).
If you are borrowing more than 80% of the value of the property, you will be required to pay Lenders Mortgage Insurance. This is a one-off payment and can be financed into the loan.
Lenders Mortgage Insurance protects Suncorp Bank against loss in the event of a forced sale of a mortgage property. It does not insure you but may make it possible for you to buy a home with a smaller deposit. You will still be responsible for all amounts owing in relation to your 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.
What influences how much I can borrow?
If you’re in the market for a new home, at some point you’ll probably start wondering how much you can afford to spend. It’s a pretty important question, after all.
Figuring out the magic number will let you whittle down your list of potential properties, shaving off the luxury beachside mansions that definitely aren’t in your budget, as well as the “renovator’s delights” that you’d be better off avoiding if you can afford to.
Everything you need to know about the First Home Owners Grant in your state
Buying your first home is an exciting time, it's can also be an expensive one. Between home loans, stamp duty, inspections, and conveyancers, there's plenty to consider. Thankfully, there are several grants and reductions that apply to eligible first home buyers, all of which can help give you a helping hand. Here, we look at what each state offers in terms of a first time home buyers grant, so that when the time is right to buy, you'll know the help available to you.
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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.