How to determine borrowing power?

InfoChoice has a Online Calculator that you to determine how much money you can borrow, and allows you to alter variables such as the loan term, interest rate, income, and expenses

Hi p@tty

Yes Brokers do this all day long and often we work with a client 6 months before they are read to purchase.

Have to disagree with Kong on this one as the online calculators are useless and really have no bearing or understanding  of some of the finer points of Credit.

Sure they may give you a broad brush stroke but nothing else.

Cheers

Yours in Finance

If you send me a PM with your email i can send excel files for every major bank that calculate serviceability both payg and self employed. It has been so valuable to me being able to determine if i can afford something before i make offers.

Its also useful in putting in different scenarios. ie changing rents etc (i don't think im suppose to have it, but somehow ended up with it)

I have 2007 ones that i have compared at Nab westpac and cba that they are still 99% the same. The only difference with cbas and nabs new calculator is they have more data slots to enter in available loans. Ie i think they only have about 10 in this one but in thier ones they have 20 or so. So you can imagine once you get a credit card a car loan couple home loans you run out of space but you can always group similar debt ie all home loans at 5.5% into one big loan so you have enough space

couple quick rules to remember if you self calculating is even though they are the exact ones used.

You still have to remember that banks will add 2% buffer to any new debt you wish to add. So when working out if you can afford it work on 2% interest higher then standard (ie 7.5% instead of 5.5% even if your loan will be for 5.5%)  for any new debt

You have to get your dependents right on the calculator if you have kids add it in. Some changes have occurred with dependents but i have doubled checked this across their new calulators using the new standard of livings. 

Overall i would say they are most useful as a very close guide. You could use them to figure out ballpark figures to within 10k-50k borrowing capacity. ( mine are usually spot on, the last 5 houses i have bought i bought without subject to finance  because i knew without going to a broker/bank that i was within my borrowing capacity once i add the rent etc)

Self employed income is in another tab. remember you could get add backs etc

there will be a LVR debt % serviceability somewhere on the page.

if  your below 50% usually the loan will be approved straight away.

above 50-65% gets referred to credit etc

over 65% gets declined or you'll need direct approval from someone higher up. and will be situational dependent. things like you have bridging finance, contractors paid in lump sums.

finally use them as a guide only to plan or map out how a individual property would or could fit into your portfolio and thus work out a financial plan or even to goal set.

ill email them out now

Ok yes i prob should of added in that I DONT RECOMMEND that for beginners.

Ill just add that for the top part of most of the spreadsheets.

most people live in 1 home

and have 1 ppor

and if you click on the negative gearing tab to take  you into were you can determine if you own properties 50 :50. tennants in common, putting 99% of the gearing on the highest income earner and 1% on your partner etc.

Personal loans even if used to 100% wont be counted as negative gearing

neither credit cards or car loans. so tick NO for those boxes

Wow I wouldn't rely on an Excel spreadsheet to work out serviceability for any lender let alone the big 4.

As Michael mentioned with all 4 using some form of credit scoring serviceability is the least of your concerns.

Cheers

Yours in Finance

No, it varies quite a lot amongst banks – there's no 2% buffer rule that applies across the board. Most banks treat OFI liabilities differently.

Use these with caution – you don't want to incorrectly input information into a 6 year old spreadsheet and then have the lender knock the deal back.

It's about what you can afford as well – not what the the bank is willing to lend.

Cheers

Jamie