How much can I buy a house for in Perth?

If you are buying a home in Perth and require a mortgage, this is a must-read to make sure that you are getting the budget you require. When a bank works out your budget to buy a property two key elements will impact your budget

1. Your borrowing power
2. The level of contribution you have to put towards the purchase

What is your borrowing power?

Let’s talk borrowing power – this is an affordability calculation that the bank completes to see if you can afford a mortgage in Perth. It’s a function of your income as assessed by the bank less your commitments again as assessed by the bank. The key here is how the bank assesses the income and commitments. Banks have differing policies concerning how they calculate the income and commitments that they will use for assessment.

For example: lender A may allow you to use 100% of any allowances you receive while lender B may only use 80% of your allowances. If you are working in a job that has many allowances this can make a significant difference in the amount you can borrow between lender A and lender B. These policies impact all the elements that can make up your income and include but are not limited to:

• How overtime is calculated
• How are allowances calculated
• How are shift penalties calculated
• Whether a lender will use all your government benefits
• Will the lender use child maintenance
• How much rental income will they use
• If you are self-employed do they look at the current year, or average or the last two years
• Do they allow investment income, etc

What is the level of contribution that you have to make towards the purchase?

This is much the same when you consider your commitments. Lenders will have differing policies around how they calculate existing commitment values. This may include:

• How they calculate your current commitment on existing loans like mortgages or car/personal loans
• Buy now pay later, do they include these separately or consider this as part of living expenses
• Novated lease commitments
• The rate they use to calculate the commitment on the new loan you are taking out
• Business debts

If you combine the differences from one lender to another you can get a significant difference in the amount a bank will lend you and this may not accurately reflect your income/commitment profile but more the way the bank sees your income/commitment profile.

Your level of contribution also impacts your budget. Lenders will lend you a % of the purchase price and you have to fund the balance and cover the costs of stamp duty and settlement fees.

For example: if you have $50,000 to cover your deposit to the lender. Lender A may lend you a maximum of 90% of the purchase price but lender B may lend you 92% of the purchase price. Therefore in this example lender A you would have a purchase price of $500,000 while with lender B this would be $625,000. As a result with Lender B, if you had the borrowing capacity, you would be able to purchase for a higher value based on the $50,000 you had for deposit to the lender.

Lenders may also have policies around the funds you are using for your contribution, for example, if you are getting a gift or selling an asset to fund your contribution they may or may not allow this as part of your contribution when assessing your loan which can also impact how they assess your level of available contribution.

Why choose Lime Mortgage Brokers

Here at Lime Mortgage Brokers Perth, we work with more than 30 lenders. This gives us the ability to assess your circumstances across a wide variety of lenders to maximise your options to meet your objectives and budget. Policy differences can sometimes equate to differences of hundreds of thousands in purchasing power. Make sure you have the right person by your side when buying a home. Speak to our Perth mortgage broker to secure the best home loan for you and your family.