What is an affordability test?
In simple terms, an affordability test involves a lender examining your financial circumstances to determine your borrowing power - essentially, how much you can afford for your mortgage payments. This will generally involve an analysis of your income, monthly expenditures, outstanding debts, and any other financial obligations you may have.
What is an affordability test?
In simple terms, an affordability test involves a lender examining your financial circumstances to determine your borrowing power - essentially, how much you can afford for your mortgage payments. This will generally involve an analysis of your income, monthly expenditures, outstanding debts, and any other financial obligations you may have.
Avoiding overcommitment
No one wants to take on more financial responsibility than they can handle, particularly in the context of something as significant as a home loan. Affordability tests are designed to prevent this scenario, ensuring that you secure a home loan that aligns with your budget. By keeping your monthly payments more manageable, you’ll be able to focus on everything else that the journey to homeownership entails.
Mutual benefits
Affordability tests offer benefits for borrowers and lenders alike. A home loan tailored to your specific financial circumstances increases the likelihood of your meeting your payments on time each month. This, in turn, reduces the risk of loan defaults and keeps the lending process ticking over. It's a win-win situation!
Safety net
Always bear in mind that affordability tests are designed with your best interests in mind, ensuring you aren’t stretched beyond your financial means and helping you to establish a solid foundation for your new home.
If you’re in the middle of saving for a home and have questions about your borrowing power, be sure to contact us. Our team of expert mortgage brokers can assist you in finding a home loan tailored to your unique needs and circumstances. Moreover, if your affordability isn’t exactly where it needs to be, they can offer valuable guidance to help you get back on track.
Understanding your borrowing power
Helpful budgeting tools
