In this article:
An excerpt from Andrew Morello's eBook The Morello Matrix: your guide to property investment. Andrew, the winner of the first series of Celebrity Apprentice Australia, provides his comprehensive personal approach to buying real estate and building a property portfolio.
To get your free copy of the full Morello Matrix eBook visit www.ybr.com.au/morellomatrix
Loan approval or serviceability
Serviceability looks at your personal financial factors, such as total income from all sources and monthly expenditure, as well as other outstanding liabilities, like credit card debts and other loans.
After tallying these amounts, the lender will calculate the final loan amount. When you’re looking for approval for a loan, use the serviceability calculators online to see where you fit.
These are the typical items factored into your loan serviceability
- Income: your total income for the year including tax i.e. your gross income.
- Applicants: how many people are applying for the loan?
- Employment: lenders like full-time employees who’ve been employed for at least 12 months.
- Tax: if you’re self-employed, the lender will want your recent tax returns, showing how much you pay yourself (not gross revenues). Also, ensure there’s no tax debt showing in your ATO portal.
- Dependents: serviceability is influenced by the number of kids you have.
- Overheads: some lenders calculate your monthly expenses based on your age, postcode, marital status, children, employment and credit cards. Other lenders will ask you to self-assess overheads.
Lenders want to see that you have enough cash left over each month to make the repayments, or service the loan. With a smaller deposit, you have more of the loan to pay off.