When applying for a home loan, part of the assessment process includes what is generally called a “serviceability assessment”. In other words, it’s a way of testing how much you can afford based on your income and minus expenses.
Part of the expense category will include debts (also known as liabilities). Not all debts are equal and when it comes to buying a house, some debts can be helpful and some not so much!
Most lender serviceability assessments require a positive net income position (also known as surplus income) and many lenders also have DTI (debt to income) benchmarks which need to be met.
Below is a summary of some common types of debt you will need to declare to your Mortgage Broker and how they might affect your home loan borrowing capacity.
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