One of Australia’s leading finance and mortgage brokers is expecting his phone to melt down after an announcement by a major bank that changes the way those with a HECS-HELP debt are assessed for a mortgage.
George Samios, founder of Madd Loans and multiple winner of the Finance Brokers Association of Australia ‘Finance broker of the year award’, said he’s just received word from the Commonwealth Bank (CBA) of major changes that will enable many singles and couples with HECS debts to borrow significantly more.
The changes come after the federal government in February urged regulators to help more Australians with student debt acquire their first home.
Mr Samios said under the new assessment criteria from Wednesday April 9, CBA will not consider HECS debts if they are due to be repaid within 12 months.
“A couple who earn $70K each and have HECS repayments that end within 12 months will now be more likely to meet lending criteria, and potentially be able to borrow an additional $36K.”
“A joint couple under the same scenario earning $240K can now borrow an additional $187K.”
However, “this is not the most exciting part,” he said, revealing that borrowers with a HECS debt due to be repaid within the next five years will be assessed using only a 1 per cent serviceability (buffer) rate.
The buffer is the rate that lenders put on top of the interest rate when assessing an application, to safeguard the borrower against future rate rises, and is currently at 3 per cent.
However Mr Samios explained, “Now rates are going down, the buffer rate is a huge impediment to many, including those with HECS debts.
“If your HECS debt is due within the next five years, under the new CBA policy, your entire loan will be assessed at 2 per cent less than normal, and this makes an absolutely massive difference.
He said a couple with a combined income of $180K could yesterday borrow $840K, “but if they have a HECS debt, they can potentially borrow $1,020,000, an extra $180K.”
“I expect other banks will follow,” he said. “This allows thousands of people who previously could not borrow due to their HECS debt to enter the property market.”
He urged those with a HECS debt who require more information to contact him or their mortgage broker.
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