How Existing Debts Affect Servicing
How existing debts are assessed in a mortgage application — including how repayments are stressed at a higher rate and why the assessed commitment differs from the actual repayment.
Core Assessment Analysis
Existing mortgages are stressed at ~3% above their actual interest rate when banks calculate your capacity. For example, if you pay 6.0% on an existing $600,000 mortgage, the bank assesses your commitment at 9.0% on a principal and interest basis over the remaining term. Furthermore, unused credit cards are calculated as a virtual ongoing liability at ~3% of their limit, regardless of whether your balance is $0.
Why Underwriters Focus Here
Banks must stress all household debt liabilities to protect against systemic defaults during rate hikes.
Key Outcome Assessment Factors
Your total credit card limits, existing investment loan structures, and pre-tax HECS tax deductions.
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