From: Stirling Reid
I have most of my loans as Interest only to improve cash flow and also improve DSR.
However on applying for a loan the bank inform me they calculate the DSR at 6.32% and paying back Interest AND principal back over 20 years regardless of the fact that my loans are IO. This means the assumed repayments are 1.39 times a IO loan at 6.32%. Similar banks have similar formulae.
My questions are:
how long have they been using this formula?
Are they being more strict during low interest rates, to allow for when interest rates go up?
When are the banks going to get over the hangup of loans must be repaid in full?
Why is this fact not mentioned in books?
I have most of my loans as Interest only to improve cash flow and also improve DSR.
However on applying for a loan the bank inform me they calculate the DSR at 6.32% and paying back Interest AND principal back over 20 years regardless of the fact that my loans are IO. This means the assumed repayments are 1.39 times a IO loan at 6.32%. Similar banks have similar formulae.
My questions are:
how long have they been using this formula?
Are they being more strict during low interest rates, to allow for when interest rates go up?
When are the banks going to get over the hangup of loans must be repaid in full?
Why is this fact not mentioned in books?
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