My understanding with finance for a mortgage is that lenders would not give finance if an individual had to spend greater than 30% of their gross income on mortgage repayments for the year. However this figure of 30% is exceeded in 4 states (NSW, VIC, TAS, QLD). In NSW for example the figure is 36.5% as of Sept 2005. Now if that is the average then their will obviously be many people above the average, thus their will probably be some people who require 45 maybe 50% of their income into repayments???
Hi MGS,
Servicability is not worked out as a percentage of wages. Lenders take your income then add a percentage of rental income, maybe overtime and some other income (percentages and what income is counted differs between lenders). They then minus debt repayments, usually worked out at a higher interest rate than you are paying (but not always). This includes investment and other debt, some take negative gearing into account.
They also minus living expenses which is generally worked out using the Henderson Poverty Line, plus a margin, which takes into account the number of people in your household. The number of dependents counted in this also may differ between lender. Some lenders place another buffer on this, some don’t.
The rule of thumb therefore is that different lenders will often lend you vastly different amounts, which is one very good reason to use a mortgage broker.
Regards
Alistair PerryAs Alistair mentions there are so many ways to calculate serviceability that one thing is for certain there is no rule of thumb.
If you compare serviceability across say a dozen lenders you will undoubtedly get a dozen different results.
Each loan should be tailored to your individual needs and requirements at the time and also in consideration of future circumstances.
A good independant mortgage broker can access literally dozens of lenders for you offering 000’s of loan products and will be able to offer you a couple of options to suit your requirements.
Richard Taylor
Residential & Commercial Finance Broker
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
Alistair is right. How it is determined if you exceed 35% DSR (Debt Servicability Ratio) is through a calculator that determines if that borrower can service the amount they are after, which can easily rise to a 50% DSR.
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