One of the most common questions many borrowers ask before they take out a loan is: “What is the maximum amount I can safely borrow?”

In today’s market, understanding how banks assess your lending criteria could mean the difference between making your dream home a reality or missing out, due to having insufficient funds.

Losing bidders “are increasingly slipping into a state similar to clinical depression,” experts have told Fairfax

Abacus Finance wants to equip you with the knowledge and tools to learn how you may be able to get a larger loan than you thought was possible.

How do Lenders calculate how much you can borrow?

Various lenders have different criteria’s they factor in when calculating your borrowing power, based on your financial situation. At Abacus Finance, our experts will save you time and frustration when it comes to finding your most appropriate loan.  Have a chat with us today and we will be more than willing to assist you.

Abacus Finance Case study:

Ms A, a client of Abacus Finance, had previously borrowed money to buy an investment home and now wants to buy a Studio worth about $310, 000 which she hopes to secure about $230, 000. After consulting one of the major banks, she was told that her maximum loan would be $217,000 (70% of its value), and several other banks said they would not finance it

In this context, Abacus Finance professional loan brokers have a comprehensive understanding of the customer’s situation and numerous loan products which could be tailored to the customer. Abacus experts utilised a specially tailored product to safely secure more than the loan Ms A needed.

During the loan process, an experienced loan broker will help the borrower select and plan the appropriate loan products based on the borrower’s financial situation. At Abacus finance, our team of lending specialists can help you find the right loan product that suits your specific situation.

Chat with us today and will be more than willing to assist you.

Disclaimer: This case study is solely for educational purposes

These hypothetical case studies are provided for illustrative purposes only and do not represent an actual client or an actual client’s experience, but rather are meant to provide an example of the Firm’s process and methodology. An individual’s experience may vary based on his or her individual circumstances. There can be no assurance that the Firm will be able to achieve similar results in comparable situations. No portion of this article is to be interpreted as a testimonial or endorsement of the Firm’s investment advisory services and it is not known whether the hypothetical clients referenced approve of the Firm or its services.

Think about your source of income

Whether you’re ready to buy your first home, your next investment property or looking to renovate and or refinance your current place. Discuss all your sources of income and expenses so that Abacus can assist with the maximum serviceable loan amount.

Every bank and other lenders have different criteria they used to assess your income and expenses. At the same time, lending policies and standards vary from bank and non-bank lenders.

A detailed income assessment is essential to get the best loan package. Banks and other lenders will review all your sources of income. Properly assessing all your income will matter in your quest to own your desired home.

9 additional sources of income

Let’s take a look at how banks review these additional sources of income to see if you can use them to increase your overall borrowing power for a home loan.

1. Bonus income

Do you receive any bonuses from your work? If so, be sure to provide evidence of bonus income when applying for a home loan. For example, your daily payroll or annual salary summary. Abacus Finance will help to ensure that your bonuses are counted in your income.

2. Commission

If you receive a commission from your job, factor it into your income when applying for a loan. Typically, a bank requires proof that you have made a tax return for the last two years or a tax return and an annual salary summary to prove that the commission is being received at a constant rate.

3. Subsidies

Some companies offer benefits to employees, including transportation subsidies, shift subsidies and overtime pay. Each lender reviews these subsidies in different ways. For example, even if you have a transport allowance of $20, 000 or more, some banks will have a limit of $5, 000.

Note: When completing a loan application, be sure to provide appropriate proof of subsidies that you might have.

4. Rent

If you receive rent from an investment property, don’t forget to count the rent in your income. Most lenders will only count 80% of your rent gained from the investment home when reviewing your loan capacity. If you buy a house with someone else this accounts for only half of the property. There are additional complexities that are accounted for in your rental income. Luckily at Abacus Finance, we will take the stress out of this process and help ease your loan application.

5. Rental income from holiday homes

If you have a holiday home for rent, keep in mind that the rental of a holiday home may be irregular like a regular home for rent. The bank will also decide whether to consider the holiday home based on its location and how the rental income has been recorded for the holiday home.

6. Stock dividends

If you have shares in the Australian or International Stock Exchange and have a fixed dividend, you can also include this fixed income in your total income when applying for a loan.

7. Pension

Pensions are divided into several types, and the bank assesses this income on a case-by-case basis. You can contact Abacus Finance and we will find the most suitable lender based on the type of pension you receive, greatly increasing the likelihood that your loan amount is accepted.

8. Family tax benefits

If you have a minor child under the age of 16 who does not have other government subsidies and your income is below the national low-income standard, you can apply for family tax benefits A or B. Many lenders take this income into account when evaluating your loan capacity and review it based on how many children you have and how old they are.

9. Child support

The Government Child Support Agency provides additional subsidies to eligible parents based on their income and the age of their children. If you have child support monthly, Abacus can advise on how to have this income applied in the application. However, you will need to provide an agreement or proof of bank income statements for the past six months.

Abacus Finance is here to help you

If you don’t know what kind of loan products are suitable for your situation, or the loan amount provided to you by your lender doesn’t meet your expectations, you can contact Abacus Finance today. One of our professional mortgage brokers will help to understand your financial situation and find a suitable mortgage that suits your needs.

The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.