Do all the banks lend the same amount?
Have you ever wondered if your current bank could lend you the same amount as the other bank down the road? Could you borrow more with that bank? These are very good questions when you are looking at buying a new home because the banks will lend you different amounts based on their internal policies and serviceability calculations.
There are many factors that impact on your overall borrowing power. Your type of income, your employment type, the type of loan you are applying for, the security type, your monthly expenses, number of dependent children and ongoing loan repayments and credit limits. These factors can make a significant difference to the amount you can borrow, and each bank will assess these factors differently.
Lenders can apply a haircut to your income based on what type of income you receive. For example, casual and overtime income can be haircut by 20%. This means when you are applying for a home loan the bank may only use 80% of your casual income. That can make a big difference to the total amount you can borrow. Another example, bonus and commission, these can be haircut up to 50%. For the property investor a haircut of 20% to their rental income and if a significant portion of a borrower’s income is derived from rental income, the application may be considered too rent reliant.
Approaching a lender directly and applying online can have a devastating effect on your credit file if your application is declined. With many lenders now using automated credit scoring and auto decision tools, its critical to keep your credit file intact. Each time you apply for credit it will have an impact on your overall credit score and potentially lead to unsuccessful credit applications.
The advantage of engaging a mortgage broker is the access they have to lenders internal policies and serviceability calculators. A mortgage broker can “run your numbers” through the lenders calculators and check internal policies to establish your maximum borrowing power whilst not impacting on your credit file. Mortgage brokers also assist with putting together your home loan application to ensure you have the BEST chance to obtain approval.
Borrowing Power Example
Let’s look at the loan amounts 10 lenders would offer a couple who have 1 dependent with a $5,000 credit card limit, earn a full-time income of $55,000 and $45,000 respectively and have a monthly living expenses of $2,500.
St George - $736,474
Citibank - $654,055
AMP Bank - $631,467
MyState - $631,467
Adelaide Bank - $621,451
CBA - $587,619
ANZ - $577,987
NAB - $578,981
ING - $519,000
Westpac - $495,698
As you can see there is a significant difference between these 10 lenders. It really is critical to your home loan application to do your research first and speak with a professional mortgage broker who will help guide you through the application process to ensure you maximise your borrowing power.