Borrowing Capacity -Help

[undercover]

Hi Guys,

I have been trying to help out a friend today (a single mum trying to buy her own house).

Been playing around with the on-line calculators and getting mixed results. Getting confused and some don't seem to allow you to enter some details.

Wondering if somebody can quickly assist with these figures.

Income = $60K per year

Has no loans or debts what so ever, only a credit card limit of $1500

Cash deposit of 50K

All children are over 18 so not dependants. The 3 adult children will be paying board of $100 per week (not sure if this can be factored in).

I'm getting figures of max. borrowing capacity of 370-380K. But not sure if that includes the 50K deposit or not?

Can somebody help give me a rough max $ figure based on the above?

Thank you.

 

[Peter_Tersteeg]

You can't rely on online calculators to determine borrowing capacity or purchase price. There's a number of factors they don't consider. In fact they usually don't even conform to the lenders policies. Any figure they give you is likely to be inaccurate.

Also keep in mind that there's probably quite a few things you're missing in the estimates you're generating.

Based (tentatively) on the info provided the maximum purchase price is about $450,000.

This is limited by both borrowing capacity and the amount of deposit. With $50k in funds available your friend should have just enough to cover a 5% deposit and purchase costs.

The loan amount would be about $427,500. The rest of her funds would go towards the purchase costs, 5% deposit and even an allowane for mortgage insurance if requried.

This amount is probably getting very close to her borrowing limits. I would suggest that a purchase price of around $400k may be more comfortable.

I must also stress that these figures are very tentative based on the information available. There is a high probability that they're not entirely accurate. Seek professional advice piror to making any offers.

 

[Aaron_C]

As Peter said the online calculators are pretty inaccurate. Get her to talk to her local broker as LMI may come into play which complicates things.

 

[Jamie M]

Like the others have said - those online calcs are very general. For instance, they're not going to tell you that if you took out a 3 year fixed rate with x lender they'll lower the assessment rate they applies to your application and your max borrowings goes up significantly.

You've got two Vic brokers responding to this thread - perhaps pass their details onto your friend.

Cheers

Jamie

 

[HLE]

I did a quick calc for you.

I've assumed:

• You live in Sydney (for living expense purposes)
• You are borrowing on your own (no other adults)
• That the lenders will ignore the board income
• No dependants
• No other debts
• $60k income gross (excluding super, overtime etc)

$405,000 is the max you could borrow. Your $50k would be in addition to this so if you allow 5% in purchasing costs then you could buy a property for $433,000.

Like the others said borrowing power isn't easy to calculate. If you choose some loan types you can borrow more than $405,000, however I would recommend that you don't borrow to your limit.

Borrowing $350,000 or so makes more sense and you need to consider if you can pay off the loan before retirement age. Talk to a mortgage broker and they can assist you further, there are plenty of good ones on this forum.