Do your spending habits need to change?
Find out how much your spending habits could impact your borrowing power.
1 August 2018
Did you realise your streaming subscriptions and gym membership could cost you up to $45,000? Mortgage lenders are paying more attention than ever to discretionary spending and here’s what we are seeing.
When you apply for a home loan, lenders calculate monthly expenses to determine if you can meet repayments. Traditionally, some lenders have used benchmark figures to determine living expenses. However, more lenders are now scrutinising exactly what applicants are spending their money on.
If a lender took into account every element of your spending, how much would it impact your borrowing power? Well, we’ve crunched some numbers to help you understand how the little things can really add up.
Assume you have the following monthly expenses: gym membership of $100, Sky TV of $150 and other streaming services such as Spotify of $15, Netflix of $15 and Lightbox of $13, all totalling $293. This amount could cut your borrowing power by more than $45,000*.
What can you do?
Don’t be discouraged. While you need to be aware of how smaller expenses can add up, you don’t have to give them all up completely.
For example, as lenders use past conduct to estimate future spending, your ability to curb some spending and stick to it can work in your favour when it comes time to get a loan.
Each lender has their own rules which can vary significantly so it pays to engage a mortgage broker to guide you toward the solution that best suits you. Reach out to your nearest Mike Pero Mortgage Adviser today.
*Lenders use a serviceability rate to determine how much customers can borrow. The average current serviceability rate on a 30 year principal and interest loan across Mike Pero’s panel of lenders is 7.59%. At this rate, for every $700 of available funds after liabilities and living expenses are deducted will allow the customer to borrow $100,000.