Your Home Loan Application

There are two sets of numbers to run when you apply for a home loan.  First on everyone’s mind is their borrowing capacity, that is, how much the bank will lend to them.

More important though is the other set of numbers, how much YOU think you can afford to repay.  Sounds simple, yet many people seem not to give this serious consideration.  There seems to be an assumption that if the bank will lend it to you then it ‘must be OK’.

In truth the largest unknown variable is your ability to budget, and your personal cost of living.

I have seen examples of families living so frugally that they could afford repayments much greater than any bank would ever allow.

I have also seen those who earn what most would consider large incomes, yet never seem to be able to make ends meet due to their spending habits.

The largest variables are motor vehicle / travel expenses, entertainment (including alcohol and tobacco), food, and childcare / schooling.

It is up to you to choose how to spend your money; what is important is that you make a conscious choice.  Track what you spend, and then do a budget.  Consider in that budget separating basic (nonnegotiable) expenses from discretionary.  Think about what your minimum living expenses would be in the event of interest rate rises causing higher loan repayments. 

Increasingly banks are looking at what your actual living expenses have been in the three months leading up to your application.  If you intend to give up smoking to put that $100 / week towards loan repayments then do it now!

All loan applicants are now expected to present an estimate of their basic living expenses as part of an approach to a bank / mortgage broker.  Be ready.

Integrity Finance Australia – Changing Lives

Daryl Borden  Ph. 03 9511 8883 ACL 392184