A recent policy change by select lenders has made it easier for homebuyers to enter the property market by allowing body corporate fees to be included in 'Standard Living Expenses.' This change significantly impacts the borrowing power of applicants, especially for those looking to purchase properties with ongoing fees such as apartments or townhouses.
What’s Changing?
Previously, body corporate fees—expenses typically associated with the upkeep and management of shared property areas—were treated as an ‘additional expense’ in the assessment of a borrower’s financial position. However, with the new policy, certain lenders are now including these fees within standard living expenses. This shift can substantially increase the maximum loan amount a buyer can secure, allowing more people to qualify for the homes they want.
The Impact on Borrowing Power
Let’s break down how this new policy affects borrowers. Consider a couple, Tristan and Georgie, both first-time homebuyers earning an annual salary of $80,000 each. They are looking to purchase a townhouse with body corporate fees of $500 per month and need a loan of $700,000 to complete the purchase. Under the new policy, where the body corporate fees are included in standard living expenses, their borrowing capacity increases to approximately $715,000.
However, under the existing policy—where the body corporate fees are considered an ‘additional expense’—their borrowing capacity would be around $650,000. The difference is significant: an increase of $65,000 in borrowing capacity thanks to the new approach.
Why Does This Matter?
For Tristan and Georgie, this change is the difference between being able to secure their desired home and falling short by $50,000. It demonstrates how including body corporate expenses in standard living expenses can empower more buyers to achieve their property goals, especially those targeting units or townhouses with regular fees.
What Should Potential Buyers Do Next?
If you were considering purchasing a unit or townhouse earlier this year, now is an excellent time to review your borrowing capacity. This policy change could mean you’re eligible for a larger loan than you originally thought, opening up new opportunities in the property market. Reach out today:
M: 0401 225 713
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