Calculating DSR
- Thread starter Nem
- Start date
Yes, credit card limits must be included (there are a few exceptions, but better to assume the limits).
Realistically it's not feasible for the average person to try to calculate their own serviceability, even the lenders online calculators are not reliable. Not all lenders use the "DSR" method either.
The various calculators generally look at:
* How money money is coming in? This includes income, existing and proposed rental income, dividends, Centrelink, etc.
* How much money is going out? Existing mortgages, consumer debt, credit cards, cost of living, etc.
* How much is left over? The difference between the previous two figures is what can be used to service the new loan.
Simple and logical enough. The problem is that the way in which each of these 3 figures is determined or used varies depending on the lenders policies. Some lenders use 80% of rental income, others 75%, a few use 100%. Existing mortgages may be on a P&I basis over 25 years at a reference rate or actual current repayments, or somewhere in between. Will negative gearing effects be considered.
There's a lot of variables to consider, the list is long and quite complex. It's a full time job to keep up with it. This is also why some lenders can be significantly more generous than others.
I can also guarantee you that if by some fluke you do put the correct figures into any lenders online calculator, their calculators don't accurately reflect their policies in all but the most basic scenarios. These calculators are simply a marketing tool to get you to make an inquiry. Many of these calculators are usually optimistic in their estimates.
Realistically it's not feasible for the average person to try to calculate their own serviceability, even the lenders online calculators are not reliable. Not all lenders use the "DSR" method either.
The various calculators generally look at:
* How money money is coming in? This includes income, existing and proposed rental income, dividends, Centrelink, etc.
* How much money is going out? Existing mortgages, consumer debt, credit cards, cost of living, etc.
* How much is left over? The difference between the previous two figures is what can be used to service the new loan.
Simple and logical enough. The problem is that the way in which each of these 3 figures is determined or used varies depending on the lenders policies. Some lenders use 80% of rental income, others 75%, a few use 100%. Existing mortgages may be on a P&I basis over 25 years at a reference rate or actual current repayments, or somewhere in between. Will negative gearing effects be considered.
There's a lot of variables to consider, the list is long and quite complex. It's a full time job to keep up with it. This is also why some lenders can be significantly more generous than others.
I can also guarantee you that if by some fluke you do put the correct figures into any lenders online calculator, their calculators don't accurately reflect their policies in all but the most basic scenarios. These calculators are simply a marketing tool to get you to make an inquiry. Many of these calculators are usually optimistic in their estimates.
Generally - yes. They take 2% to 3% of the limit per month.
Some lenders may waive this if you've proven an ability to clear the card regularly each month.
Having said all this - there are other ways to improve your borrowing capacity - and lender selection being the number one option.
Cheers
Jamie
Great post Peter.
As mentioned, there are a whole range of factors that go into servicing assessments that differ from lender to lender.
With regards to your specific qn - generally yes. Although there are exceptions where some lenders will accept perfect repayment history as a tool to exclude from servicing.
