All You Need to Know About Serviceability When Buying Property in Australia: Buying a home in Australia is an exciting milestone and one that many first-home buyers and experienced investors can recognize. It can often also be overwhelming as there are many considerations to take into account, such as serviceability. Knowing how your serviceability is calculated when buying a property in Australia can make a big difference when it comes to obtaining the finance you need for a home loan, investment property, refinance, car loan, or personal loan. In this blog post, we’ll outline everything you need to know about serviceability so you’re well-informed when applying for finance.
What Is Serviceability?
Serviceability is the calculation of how much your income supports borrowing. It takes into account any regular repayment commitments, ongoing living expenses such as rent, groceries, bills, and essential costs like childcare. Your current financial situation is assessed to ensure you can pay back the loan if accepted. Generally speaking, lenders look for a minimum 30-40% buffer between what you earn and what you owe each month. This means that if your repayments are 40% or more than your after-tax income then it may be difficult to get approved for a loan.
When assessing serviceability, lenders will assess things like:
• Regular Pay (must come from verified sources)
• Other Income – such as bonuses & overtime pay
• Living Expenses – such as rent, childcare, and other expenses
• Other Personal Debts – any existing loans you have, credit cards, etc.
• Loan Structure – the loan type, rate, and term (length of loan).
Life Events And Personal Circumstances
It’s important to note that serviceability can be affected by life events or personal circumstances since your last application. If your living expenses or income changes this could affect how much you’re able to borrow. It is also worth noting there are some lenders who will allow a reduced serviceability assessment for those who are self-employed or may not have recently verified income streams.
Getting Into The Details
So now you know what serviceability is and how it affects your borrowing capacity, it’s time to get into the details. Do you have a good credit score? Are your expenses manageable? What kind of loan are you looking for – and how long do you want to take it out for? Answering all these questions will help you make an informed decision when applying for finance.
Ultimately, it’s important to remember that serviceability is just one factor in the overall lending process. Booking us for a free consult for professional advice can greatly increase your chances of getting the right loan to suit your individual needs so don’t hesitate to press the button below. Good luck and thank you for reading “All You Need to Know About Serviceability When Buying Property in Australia“
