A lot of people are not sure what exactly a mortgage assessment rate is and more significantly – how can it impact your ability to get a home loan? There is a fundamental misconception that banks and lenders assess your ability to repay a home loan on interest rates at the time you submit your loan application. Unfortunately, this is not the case. Over the course of the life of a loan, interest rates will inevitably rise and fall – so when a lender assesses an application, they base their decision on a higher interest rate – this gives both the lender and the borrower more confidence that the loan repayments can be made in the event of sudden interest rate rises.
The higher rate that a credit assessor will use is called the Assessment Rate which is usually 1.5-3 percentage points above the standard variable rate – this can vary from lender to lender. Lenders can use different mortgage assessment rates for different loan products depending upon their individual risk profiles. Most lenders are fairly cagey about the assessment rate levels but the effect it can have on borrowing capacity across different lenders can be quite large and quite often can be the difference between a loan application being accepted or declined. When combined with the implications of living expense measures amongst different lenders it can make getting a loan approved all the more challenging.All the more reason why a good mortgage broker can help steer you through and find the most appropriate loan product for your needs and objectives. As usual I am always available for any questions and more than happy to help.
