What is the most important factor when applying for a loan?

As brokers we are constantly asked; What is the interest rate? How cheap of an interest rate can you offer? But if we go with EXAMPLE Bank can’t we get a cheaper interest rate? There is a common misconception that interest rate is the most important factor when deciding which lender to choose.

There are two things that should come to mind first; Serviceability and Equity.

1. Serviceability refers to your ability to make repayments on a loan, based on loan size, income and expenses. This will differ lender to lender and therefore it important to establish the available lender options based on serviceability. This does not take into account your current assets including how much cash you have available.

2. Equity: The subjective nature of valuations suggests that varying results can be obtained for the same property. The correct valuation will allow the correct amount of equity release in the property. To avoid costly Lenders Mortgage Insurance you generally need to have at least 20% equity remaining in a property at any one time.

In an ideal situation the lender offering the greatest borrowing power for your situation will also be offering the most competitive rate however this is not always the case and a small compromise may be required to get the loan amount that you need.