What Is Serviceability? (Is Dave tired yet?)🐾
When people think about getting a home loan, they often focus on the deposit, the property price, or the interest rate.
But one of the biggest things a lender looks at is serviceability.
So, what is serviceability?
Put simply, serviceability is a lender’s way of working out whether you can comfortably afford the loan repayments.
It comes down to a pretty simple idea:
How much money is coming in, versus how much money is going out?
Lenders look at your income, your existing debts, your living expenses, and a few other factors to decide whether there is enough room in your budget to take on a new loan.
What lenders look at
When assessing serviceability, lenders will usually look at things like:
your wages or business income
rental income, if you have investment properties
existing loans or credit cards
buy now, pay later accounts
everyday living expenses
dependants
the type of loan you are applying for
It is not just about whether you can afford the repayment today either.
Lenders also apply buffers and stress testing to make sure the loan still looks affordable if interest rates rise or your situation changes.
Why serviceability matters
You might have a good deposit.
You might have found the perfect property.
But if the numbers do not stack up from a serviceability point of view, the lender may not approve the loan amount you want.
This is why serviceability can be one of the most important parts of the whole process.
It can affect:
how much you can borrow
which lender suits you best
whether refinancing is possible
whether a purchase plan is ready now, or needs a bit more work first
This is where a broker helps
This is one of the big reasons people speak to a broker early.
A lot of the time, people are guessing what they can borrow based on rough calculators online, but those tools do not always tell the full story.
As your broker, I work through your income, debts, and expenses properly to help you understand what your position actually looks like.
That means we can look at things like:
whether your borrowing power is stronger than you think
whether something is reducing your borrowing capacity
whether there are lenders that may assess your situation more favourably
whether there are a few tweaks we can make to improve your position before applying
Sometimes the result is good news.
Sometimes it shows us what needs to be cleaned up first.
Either way, it is better to know early and have a plan.
Serviceability is not just about buying
Serviceability also matters if you are:
refinancing
looking at using equity
consolidating debts
upgrading your home
buying an investment property
Even if you already have a mortgage, your ability to service new lending still needs to be assessed.
The simple version
So in plain English:
Serviceability is whether your income, expenses, and debts leave enough room for you to afford the loan.
It is one of the key things lenders use to decide how much you can borrow — and whether the loan is suitable in the first place.
If you want help understanding your borrowing position, that is exactly what I am here for.
A quick chat now can save a lot of guesswork later.
Need help working out your borrowing power?
Get in touch for a no-obligation chat and let’s see what your numbers look like.
— Iain & Dave
Mortgage Muster