Buying your dream home just became easier
Great news for homebuyers – on 5 July 2019, APRA introduced a new reform that allows borrowing institutions to set their own interest rate buffer of at least 2.5 per cent, which as a result could give you access to better borrowing power.
Interest rates explained
Serviceability assessment is one of the most important steps in getting your mortgage approved as your financial institution of choice assesses your expenditure on lifestyle, income, assets and other liabilities to determine whether you would be able to repay your mortgage consistently. What they also do, is assessing if you will be able to comfortably repay your mortgage in case the interest rate fluctuates by evaluating your loan against a higher interest rate.
Before the new reform was announced, most loans were assessed at the interest rate of 7 per cent. Now, lenders will compare it to minimum 2.5 per cent over your mortgage rate. Most interest loans are just over 3 per cent, which means that your application will be tested at a rate below 6 per cent instead of 7 per cent – while one per cent may not sound like a lot, it makes all the difference when it comes to your borrowing power over the lifetime of the loan.
What does it mean for you?
Banks and lenders are now able to asses your capability to repay your mortgage at a lower interest rate floor, which means you could be approved for an extra $50,000 than what you thought was originally possible. Dependent on your financial situation, it could be the difference between buying a home you like for $500,000 or a home you love for $550,000.
At Coronis Finance, we have a team of industry professionals who will be able to give you the best advice based on your financial situation. If you’ve been thinking about buying your first home, upsizing or moving into a better suburb, now’s the time to get in touch with our team of mortgage brokers. It costs nothing to use our services and we’ll do all the hard work for you, comparing more than 40 lenders and products to find the one that’s the perfect fit for you.