Login
ISCOVER
Demonstrable commitments from prospective borrowers to adjust their spending ahead of a home loan application will be considered as part of a lender’s serviceability assessment.
Government-backed lender HomeStart Finance has informed brokers that it has revised its policy for home loan serviceability tests.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
The South Australia-based lender currently requires applicants to demonstrate, over a three-month period, that their rent and/or savings are equal to or greater than the proposed monthly repayment obligations under a HomeStart loan.
However, effective immediately, the lender will now consider demonstrable “lifestyle changes” over the three-month period, which may include decisions to cancel discretionary spending such as a Netflix subscription.
“These lifestyle change decisions must be declared by the applicant and the expenditure(s) identified in recent bank statements,” HomeStart noted.
The state government-backed mortgage lender added that brokers are required to provide commentary in their submission notes.
As a result, HomeStart has updated its serviceability assessment process to the following:
- the calculation of a maximum loan available as a quote, based on percentage of debts to net income and taking into account HomeStart product restrictions;
- determining whether the applicant will have at least a minimum of 5 per cent of net surplus income (NSI) to cover non-essential expenses;
- demonstrating capacity to repay by verifying whether the applicant has:
- a combination of rent and/or savings that are equal to or greater than the proposed HomeStart monthly loan repayment over the preceding three months; or
- demonstrate “lifestyle changes” through a deliberate reduction in discretionary expenditure in the preceding three months.
[Related: Banks relax valuation policies]
