Let’s talk about demonstrating to the banks YOUR ability to make mortgage repayments.
Due to new regulations within the finance industry, some lenders now require the client (you) to show that they can pay what the future mortgage repayment would be (either the same amount or more). They require this for 3-6 months PRIOR to applying for the mortgage (you should start now!!).
Your capacity to pay can be shown between your rent/board payments and genuine savings.
Example: You’re applying for a $400,000 mortgage. It is likely your repayments would be around the $500 pw mark. You’re already paying $300pw in rent. You only need to save (at minimum) an extra $200pw to show the lender that between the two amounts, you can afford the total of $500pw.
The Banks are calling this a new propensity to pay test. It does three things.
1) Proves to the bank you can afford the payments
2) Proves to yourself you can afford the payments
3) It increases your level of genuine savings, which you will need for your deposit.
So, if you are thinking about buying over the next 6-12 months, you should start now!
Please feel free to give us a call if you’ve like to work out the best plan for you.
Disclaimer: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.