When it comes to home loans, not all banks are created equal.
They all view and assess your application in different ways.
Things like self-employed income, bonuses or rental income may be treated differently which can affect the amount you can borrow.
Banks have policies and tools to gauge the suitability of an applicant such as stress test rates and UMI (uncommitted monthly income) calculations.
These tools and calculations differ across all banks.
For example, let’s take the stress test.
A stress-test is when a bank assesses whether you can afford to continue to make mortgage payments at a higher interest rate than the one you’re expecting.
Currently the stress test rates can vary across the lenders, anywhere from the mid 8% to over 9%.
So if one bank has a stress test rate of 8.5% and another has a stress test rate of 8.95% then you may have a better chance of getting your lending requirements satisfied at the bank with the lower stress test rate.
Some banks also use a UMI calculation which looks at how much uncommitted income you will have left over at the end of the month – another way to see if you are able to afford the new home loan you are seeking.
Some banks will have a very strict UMI number that they adhere to, while others may be more forgiving.
When it comes to assessing your borrowing power, the banks have different criteria & guidelines they must follow, and their calculators are set up based on this criteria.
So how one bank views your application can majorly differ from another.
For example; one bank may not accept boarder income where another might.
One bank may use your overtime or bonuses when assessing your income and another may not.
These things may seem minor, but can actually add up to quite a lot when you are trying to get the most out of your borrowing power.
To put this into a visual context, below is a quick comparison between the Lenders and the maximum borrowing available to the same couple.
If you are dealing with Lender G as opposed to Lender A, you may be cutting yourself short by nearly $145,000.
This could be the difference between securing the property you want or not.
So how do you know if you are getting the most out of your borrowing power?
You really need to be casting the net far and wide and looking at what every bank has to offer.
This is where having a Mortgage Adviser in your corner really counts.
Our job is to make sure that we find every dollar possible for our clients in this ever changing market.
Not only do you get all the relevant options available to you across various lenders, but we can run the calculations for you (like in the table above), so you can get a clear view of whether you are maximising your borrowing power and getting the best deal available for you.
The expert help of a Mortgage Adviser can make all the difference.
From navigating the lending landscape, to packaging and presenting your home loan application to the lender in the best possible light, we are here to support you every step of the way.
If you would like some advice around your particular situation then please don’t hesitate to get in touch with us.
Applications for finance are subject to meeting the lenders criteria, terms, and conditions. Refer to our website www.hbmi.co.nz for our Public Disclosure Document.
