Australia mortgages question

[Simontucks]

Hi there,

Just wondering if someone could answer a question for me.we are moving to Brisbane in April and have found out that with our visas (residency) we can get a mortgage pretty quickly as long as we have work contracts and a decent deposit,which we have ($270000).what I'm looking for advice on is how do lenders in Aus determine the amount they will lend for a mortgage?.is it similar to UK  i.e approx 3 times salary and affordability checks?

Thanks in advance for any replies

[can1983]

We did the process 5 years ago. It was quite quick to get a mortgage and luckily we only needed to use one income (because the second was contract work and 'less reliable')

But since then rates have tripled so I'm not sure how the affordability checks are working now sorry. We borrowed about 3 times one income but i think that was about the limit for a 30 year term. Now i suspect the same loan and salary wouldn't pass the litmus test...

We also had a 60% deposit. Whilst $270k is a lot of money, and i wouldn't ever describe it as not being so, in Brisbane i suppose if its a house you are after that's going to be a 20% deposit after all the purchase fees are covered.

 

[Simontucks]

14 minutes ago, can1983 said:

We did the process 5 years ago. It was quite quick to get a mortgage and luckily we only needed to use one income (because the second was contract work and 'less reliable')

But since then rates have tripled so I'm not sure how the affordability checks are working now sorry. We borrowed about 3 times one income but i think that was about the limit for a 30 year term. Now i suspect the same loan and salary wouldn't pass the litmus test...

We also had a 60% deposit. Whilst $270k is a lot of money, and i wouldn't ever describe it as not being so, in Brisbane i suppose if its a house you are after that's going to be a 20% deposit after all the purchase fees are covered.

 

Thanks so much for the quick reply.we've been told that for a $800000 mortgage we would need $240000 deposit plus costs(20%) but,I can't find out how they work out the amount they are willing to lend

[BendigoBoy]

Not sure there's any rhyme or reason to it.  This little piece is sensible enough at first glance: https://www.homeloanexperts.com.au/how-much-can-i-borrow/how-do-banks-calculate-my-borrowing-power/

But I've just hopped around NAB / Commonwealth and a few other banks' websites out of curiosity and they were throwing up borrowing figures that had a discrepancy between them (from lowest to highest) of almost $200,000 across lenders, when I put my details into their calculators.

I've always held that 3x is a sane and sensible multiple to borrow as an absolute maximum, just in case the unforeseen happens.  The sad fact is, for much of Australia, there's no way they could get on the ladder at all if they were restricted to a 3x multiple.

Edited November 21, 2023 by BendigoBoy

[can1983]

57 minutes ago, BendigoBoy said:

Not sure there's any rhyme or reason to it.  This little piece is sensible enough at first glance: https://www.homeloanexperts.com.au/how-much-can-i-borrow/how-do-banks-calculate-my-borrowing-power/

But I've just hopped around NAB / Commonwealth and a few other banks' websites out of curiosity and they were throwing up borrowing figures that had a discrepancy between them (from lowest to highest) of almost $200,000 across lenders, when I put my details into their calculators.

I've always held that 3x is a sane and sensible multiple to borrow as an absolute maximum, just in case the unforeseen happens.  The sad fact is, for much of Australia, there's no way they could get on the ladder at all if they were restricted to a 3x multiple.

agree with inconsistency. Commbank would only lend us $75k  

[BendigoBoy]

27 minutes ago, can1983 said:

agree with inconsistency. Commbank would only lend us $75k  

If I could drop an F scrabble tile emoji as a response to that message, believe me, I would.

A lot of lenders won't even do lending under $150k from what I can see on the bank websites.

[Marisawright]

I worked for RAMS in the days when it was an independent lender.  As a small player, they had to have a mortgage insurer who insisted they stick to sensible lending practices.  That included things like assessing the borrower could afford the loan, having a professional valuer go out and valuer go out and value the property, and they could only lend up to 90% of the value.

That's why they were never really competitive.   The big Australian banks don't have any such limitations on their practices.   When I worked at RAMS, the Commonwealth Bank didn't even visit properties to value them.  They used retired bank staff and just sent them on a drive-by to make sure the house existed.   They didn't care about an accurate value of the property that much, so long as they felt they could recoup their loan if the borrower defaulted.    

RAMS had to ask self-employed people to present their books before they could offer a loan.  The bigr banks just asked for a statutory declaration stating what the business earned, no need for any kind of proof. Again, not worried if people could really afford it, because why should they care if someone defaults?  They sell the house, recoup their loan, they're happy.

[DrDougster]

It depends massively on your personal situation - job security, volatility of rates and outgoings are the most important things to bear mind. I don't think a blanket 3x income as a maximum is a useful approach.

Would you bet your house on it? Is the prescient question!

This year we borrowed an eye-watering amount of money at 95%. But, we were able to get a very good rate, not needing lender insurance, based on incomes, income progression and job security. We have high outgoings and the bank took all of this into account. However, the way the market has moved, the house would be way out of reach now. 

If you are going to be moving to a job working for government or a charity there are also quite a lot of things that can be salary packaged in Australia that you wouldn't think possible coming from UK.

[Simontucks]

Thank you all for the replies!. It seems a bit of a minefield but I'm sure that's just me. What Im worried about is moving then finding we can only borrow enough to buy a 1 bed apartment with no garden, we have 2 daughters and 2 dogs🫣.

[Simontucks]

2 hours ago, DrDougster said:

It depends massively on your personal situation - job security, volatility of rates and outgoings are the most important things to bear mind. I don't think a blanket 3x income as a maximum is a useful approach.

Would you bet your house on it? Is the prescient question!

This year we borrowed an eye-watering amount of money at 95%. But, we were able to get a very good rate, not needing lender insurance, based on incomes, income progression and job security. We have high outgoings and the bank took all of this into account. However, the way the market has moved, the house would be way out of reach now. 

If you are going to be moving to a job working for government or a charity there are also quite a lot of things that can be salary packaged in Australia that you wouldn't think possible coming from UK.

Thank you so much for the reply.

My wife has options regarding job,the equivalent to what she is doing here would mean working for government in Australia and I'm going to be working in construction.

[can1983]

certainly having children reduces the amount you can borrow, they have a 'default outgoings' calculator which is used to assess likely outgoings unless you can demonstrate it to them for your circumstance. If you are recent migrants probably default values are all you can do.

i have family in Brisbane, 1 million is a reasonable budget for a family home in an ok suburb.

So id say you are going to be looking at 250-300k pa combined income to borrow 750-800k 

Someone else might say different but that is what i'd say

[Marisawright]

1 hour ago, Simontucks said:

Thank you so much for the reply.

My wife has options regarding job,the equivalent to what she is doing here would mean working for government in Australia and I'm going to be working in construction.

Just be aware that a lot of government jobs require you to be a citizen. What kind of govt jobs do you mean?

[can1983]

4 minutes ago, Marisawright said:

Just be aware that a lot of government jobs require you to be a citizen. What kind of govt jobs do you mean?

Yep that's true I had to have an exemption for 5 years signed by the Department Secretary. They could only employ me (with pr) because there were no suitable Australian applicants.

The clause was if I failed to get citizenship before 5 years were up I was out of a job.

[BendigoBoy]

1 hour ago, can1983 said:

Yep that's true I had to have an exemption for 5 years signed by the Department Secretary. They could only employ me (with pr) because there were no suitable Australian applicants.

The clause was if I failed to get citizenship before 5 years were up I was out of a job.

Hopefully they sort out the delays and hold ups getting citizenship we faced over the last few years. Wife and I waited 9 months after submitting our application for citizenship until we got the test. Then it was six months until the ceremony...

Edited November 22, 2023 by BendigoBoy

[DrDougster]

2 hours ago, Simontucks said:

Thank you so much for the reply.

My wife has options regarding job,the equivalent to what she is doing here would mean working for government in Australia and I'm going to be working in construction.

I would make sure that you keep records and receipts of all the costs of relocating. You may be able to retrospectively package costs in a tax efficient form.

[Simontucks]

2 hours ago, can1983 said:

certainly having children reduces the amount you can borrow, they have a 'default outgoings' calculator which is used to assess likely outgoings unless you can demonstrate it to them for your circumstance. If you are recent migrants probably default values are all you can do.

i have family in Brisbane, 1 million is a reasonable budget for a family home in an ok suburb.

So id say you are going to be looking at 250-300k pa combined income to borrow 750-800k 

Someone else might say different but that is what i'd say

To be honest I disagree,we have family in the suburbs,I won't say which but it's one of the nicer areas. Very close by there are plenty of lovely 4 bed properties in the $700000 bracket.

Edited November 22, 2023 by Simontucks

[DrDougster]

12 hours ago, Simontucks said:

To be honest I disagree,we have family in the suburbs,I won't say which but it's one of the nicer areas. Very close by there are plenty of lovely 4 bed properties in the $700000 bracket.

Depends where you want to be. I'd say Ascot, Hendra are nicer areas and they'd be five times that...

[Ken]

On 22/11/2023 at 10:53, Marisawright said:

RAMS had to ask self-employed people to present their books before they could offer a loan. 

I've never understood the banks aversion to lending to the self-employed. Their income can be volatile, but they don't get made redundant or sacked and lose all their income overnight as so often happens with employed people. There is of course an exception with contractors that only have one customer - but they shouldn't really be considered self-employed in the first place.

[Simontucks]

8 hours ago, DrDougster said:

Depends where you want to be. I'd say Ascot, Hendra are nicer areas and they'd be five times that...

As you say depends where you want to be and what your expectations are.My brother lives on a $8 million acreage, obviously we can't afford that but in the surrounding towns there's lovely houses in nice areas priced at $700000 25 minutes from the city.

 

Edited November 23, 2023 by Simontucks
More information

[InnerVoice]

On 22/11/2023 at 08:25, Simontucks said:

Hi there,

Just wondering if someone could answer a question for me.we are moving to Brisbane in April and have found out that with our visas (residency) we can get a mortgage pretty quickly as long as we have work contracts and a decent deposit,which we have ($270000).what I'm looking for advice on is how do lenders in Aus determine the amount they will lend for a mortgage?.is it similar to UK  i.e approx 3 times salary and affordability checks?

Thanks in advance for any replies

We obtained our mortgage through UBank a few years ago and they thrashed the pants of everyone else in terms of interest rates and conditions. You don't need to go through a broker either. I would recommend them but everything's online and I know that isn't everyone's cup of tea. You can go through the process of applying (link below) and it will eventually throw out some figures as to whether they will lend to you and how much. They lent me about 4 times what I was earning at the time and I was able to stick down a similar deposit to what you have, but the market has changed hugely since then and so have prices. Hope this helps.

https://www.ubank.com.au/home-loans/get-started

[InnerVoice]

2 hours ago, Simontucks said:

As you say depends where you want to be and what your expectations are. My brother lives on a $8 million acreage, obviously we can't afford that but in the surrounding towns there's lovely houses in nice areas priced at $700000 25 minutes from the city.

If I was you I'd be buying some land of my brother and building my house there!

[Simontucks]

8 minutes ago, InnerVoice said:

If I was you I'd be buying some land of my brother and building my house there!

Has been mentioned.....he dislikes neighbours lol,even family!

[Simontucks]

13 minutes ago, InnerVoice said:

We obtained our mortgage through UBank a few years ago and they thrashed the pants of everyone else in terms of interest rates and conditions. You don't need to go through a broker either. I would recommend them but everything's online and I know that isn't everyone's cup of tea. You can go through the process of applying (link below) and it will eventually throw out some figures as to whether they will lend to you and how much. They lent me about 4 times what I was earning at the time and I was able to stick down a similar deposit to what you have, but the market has changed hugely since then and so have prices. Hope this helps.

https://www.ubank.com.au/home-loans/get-started

Thank you so much for that!.will take a look

[Ausvisitor]

Just remember (like in the UK) the amount you can borrow is only half the equation, you have to add in how much it costs to repay too. $750k over 30 years is nearly $5k a month in repayments at the moment that's 47% of your pay after tax gone on a mortgage (assuming one of you earns $115 and the other $50 - which is the minimum you'll need with most banks to get close to being allowed to borrow $750)

 

[InnerVoice]

3 hours ago, Ausvisitor said:

Just remember (like in the UK) the amount you can borrow is only half the equation, you have to add in how much it costs to repay too. $750k over 30 years is nearly $5k a month in repayments at the moment that's 47% of your pay after tax gone on a mortgage (assuming one of you earns $115 and the other $50 - which is the minimum you'll need with most banks to get close to being allowed to borrow $750)

That would be well above the 28/36 rule unless the borrower had absolutely no other debt, and wouldn't leave then much disposable income.

On the bright side, interest rates are more likely to fall than rise in the foreseeable future so at least their repayments should fall.