- SchnakeParticipant@schnakeJoin Date: 2014Post Count: 11
What do most banks/lenders use as their interest rate when assessing a customers ability to repay a loan against other expenses? It’s been a while since I have noodled in this space, so I’m wanting to get an idea to see how much things have changed as APRA have changed the rules.
(For reference, the last time I enquired it was ~2% above their standard variable rate).Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
In the main 7.25% on both existing & new debt but there are a number of differences in the interpretation.
Odd second tier lender still working off actuals for existing debt but a dying breed.
Yours in FinanceSchnakeParticipant@schnakeJoin Date: 2014Post Count: 11
Thanks Richard. This allows me to calculate a few things for myself.Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
Agree with Richard – generally around the 7% mark
Having said that – there are other factors involved when taking into account max borrowing for investors. Some lenders add back negative gearing, some take a higher percentage of rental income, some cap the yield….the list goes on.
JamieStevenParticipant@steven1982Join Date: 2017Post Count: 189
You mean it is not just the new loan application that they will use 7%…
Even the loans that were already approved at 4%, they will treat that as 7% as well?TerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
Don’t forget most also factor in existing debts as PI over loan terms less the IO term.
so if you had a 5 year IO term on a 30 year loan and then next day go and get a new loan, the first loan will be assessed as if it is a 25 year PI loan – usually at 7%+
And that is why it is so hard to buy multiple properties quickly these days.George PoullosParticipant@york-pJoin Date: 2015Post Count: 10
As being alluded to above, there are quite a few things that have changed in the last couple of years & are constantly changing as we speak. Assessment rates for existing debt, new debt, OFI debt, living expense calculations, P&I/IO debt assessment differences, margin lending debt to name a few.