If you’re trying to work out how much you can afford to borrow for a home loan or for an investment property then your first step will often be to go online and to punch you’re figures into what’s called mortgage calculator.
These are basic tools online where you don’t actually have to see anyone, you don’t have to talk to anyone, you don’t have to answer a phone call – just type in your figures and it spits out a result at how much it estimates that you could borrow.
Today I sit down with Don from Mortgage Choice and we talk about whether or not these tools are accurate and what might be a better step for you if you are serious about going ahead and looking at purchasing you’re own home or an investment property so check it out.
Ryan: What about the online calculators that are out there where people can just punch in the numbers and it gives them a figure? I find them to be very rough at the best. Mortgage broker can look at so many different landers, but when you’re using a calculator it’s generally pulling data from just one lander. Generally it’s not using all the data that that particular lander would take into account anyway. So it’s not going to be completely accurate?
Don: No, you’re right Ryan. The online calculators… I get clients all the time who might ring a bank or even telephone **after he has** number and I get preapproval. And so they’ve never met the person, they just got over the phone or online inquiry and I got preapproval. They’ll then go out and buy a home. Then I’ll go back to the bank and say ‘Here you are, they are ready to go, I’ve got preapproval’. And then they found at the last minute, they would never going to buy that property because the online system or the calculator that was used was really not that accurate and it wasn’t really designed in a way that’s specific for that people or points. So online calculators are not very accurate at all. Every single bank has a different way of calculating *********. And it can vary. I’ve seen variances of 200 000 from the lowest to the highest, and that’s about 20 different lenders. And it’s that varying. So that’s the view you’re going to… Some varying** has 20 of them, or 27, rather than just varying to one. You might walk into wrong door.
Ryan: And that’s the thing really – when you’re looking at just one online calculator or when you just go to your local bank, then you’re going to get that one opinion. But when you go to a mortgage broker then you can get the opinion of multiple different loans. I have heard examples where you have clients, and went down saying ‘we can lend you $300, 000 or we can’t land you anything’ and then the other one would say ‘we’ll land $500, 000 or $600, 000’, so there’s a big variation in what you can borrow, depending on what lender you go to.
Don: And there’s a huge variance in the type of incomes, that a **** or a bank will accept. Some people earn unusual income, they have unusual jobs, so one bank may say that’s fine, but the other bank might say they can’t accept that type of income. It might be casual, it might be part time, it might be on probation, the person might have had a lot of jobs in a short period of time like in a mining industry… So depending on their deposit, some banks have really different way of working it, and much slower approve for that client.
Ryan: OK, so just for the new audience who don’t necessarily know how the loaning process works, what is preapproval and why should people go back into that?
Don: Preapproval means that your information is being checked. So your income, your expenses and your age or family setup. A lot of the banks or all the banks, they work out someone’s amount they can borrow by stalling income and expenses, but also the family setups. So a single person has less living expenses then a married couple with 3 children.
Ryan: Yeah, I’m married with 2 kids. So obviously having those dependents make it’s harder to get a loan. They’re are taking into account those expenses, because you have more mouths to feed.
Don: Exactly, it reduces that person’s amount they can borrow. So again there’s such a variance in how much that one scenario, that one family can borrow from lender to lender – it’s a huge difference. You really need to do your homework first, find a **demos** they can borrow and then the preapproval is basically to make you sure know you can get the finance, so you can comfortably go out to the market and do your homework knowing your budget and how much you can spend.
Ryan: So preapproval – the banks will say ‘ we’re happy to give you this loan, on the basis that we valued the property and it is at the valuation, or you’re paying what it’s worth.’ You’re not paying more than what it’s worth.
If you want to get in contact with Don, then I’ve made it super easy for you – just go to pca.im/don, which is my short link that will take you directly to Don’s website and give you his details.
He deals with clients all over the country, so it doesn’t matter where you are – whether you’re in Gold Coast or not, you can get in contact with him. He can help you find out what your borrowing capacity is, he can help you get a loan and he can advise you on the best loans that are suitable for you. So again, that link is pca.im/don.