Calculating changes to your borrowing power

Interesting one I found out from my broker...

Banks dock you with a nominal rent expense of $700 per mth even if you still live at home from your folks.

However if you are from certain ethnic background where living at home well past your 20s is the norm (Asian, Greek, Italian)... you could prove that you still live at home and get it waivered!!

I assume policies vary from lender to lender but an interesting one to explore nevertheless

Haha i'm pretty sure ethnicity isn't in lender policy. For some lenders, as Jamie said, a letter would do. Others have it as a necessary part of their servicing calculator.

Cheers,
Redom
 
Some lenders won't require any nominal board figure, whilst others may factor in $540-$700 a month. Jamie's hit the nail on the head, a letter from parents say the applicant lives at home without being charged board or rent usually fixes this up.

If servicing is THAT tight however, it's just a case of putting it with a lender who will accept $0 board payments at default.
 
Enjoy it - my 8 year old doesn't think I'm cool anymore. Probably doesn't help when I'm pleading her to hug me when I drop her off for school.

I am and I ask her (the 8 year old) is Dad still cool. She says no but insists I still walk her to class rather than kiss and drive so I figure I still "got it"!
 
Hey Redom,

How about a novated lease?
I currently have one set to expire in October and will then need to decide if I get another one or instead just purchase a car under a loan.
Regardless the next car I purchase will be around the 20k mark.

How do lenders look differently at novated leasing versus a personal car loan?

Also from a tax perspective I have heard novated leases are not ideal if you hold negatively geared properties? Not sure though?
 
Hey Redom,

How about a novated lease?
I currently have one set to expire in October and will then need to decide if I get another one or instead just purchase a car under a loan.
Regardless the next car I purchase will be around the 20k mark.

How do lenders look differently at novated leasing versus a personal car loan?

Also from a tax perspective I have heard novated leases are not ideal if you hold negatively geared properties? Not sure though?

Sorry Albanga, completely missed your qn. General guide think of the repayment of personal debt as an expense.

Given that the loan terms are so short (relative to mortgages) - they have a larger impact on your borrowing power than longer term debt (mortgages). Difference between lease and personal loan will depend on your repayment. Some leases come out of pre-tax salary (salary sacrificing) - if this is the case a lower income may need to be used for servicing purposes as this deduction cant be stopped at any time (contractual repayment obligation).

Cheers,
Redom
 
How about a novated lease?

Novated leases can kill your serviceability from my experiences so best exploring this with your broker in line with short, medium and long term goals before commiting to another one.

Would be worth exploring the option of an equity loan from existing property on interest only or pay cash for the car, pending your individual circumstances.

I have not actually crunched the figures on a novated lease v cash/equity but I know the cash flow is a lot better with the latter and cash flow is da king!
 
Would be worth exploring the option of an equity loan from existing property on interest only or pay cash for the car, pending your individual circumstances.

If this option is available to you, definitely go with it with serviceability in mind. You effectively cut your repayment expense by up to 3-5 times just by expanding the loan term out.
 
No worries Redom thanks for getting back to me eventually. The lease is pre tax so would have an affect on my serviceability. I understand the equity option but more keen to use the equity to invest.
I don't plan on making much change until the lease expires so when it does I'll pay it out and then maybe look at other options such as a family loan.
 
Reedom (or someone), how do lenders look at dividends in terms of serviceability? Do you need to show consistency over x period or ..?
 
Reedom (or someone), how do lenders look at dividends in terms of serviceability? Do you need to show consistency over x period or ..?

Statement/letter less than 60 days old from a recognised brokerage (e.g. CommSec) detailing the current level balance/holdings of the investment with the value of the investment to be confirmed utilising the current ?sell? rate.
 
Great post. A bit left field, but does life/trauma/income protection change the way a bank looks at an application? Does it affect serviceability?
 
Great post. A bit left field, but does life/trauma/income protection change the way a bank looks at an application? Does it affect serviceability?

It might improve your credit score a little. The premiums might also reduce your disposable income (although it is voluntary). Overall the effect is insignificant.
 
Novated leases (the ones that all inclusive) are crap for servicing because they allow for running costs of the car in the deducted amount each pay. A personal or car loan is just the loan repayment so is usually a lower amount.

The lenders effectively double dip on living expenses with novated leases as there is no add back for the reduced living costs ie rego petrol etc.
 
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